can anyone tell me what the status of your credit is after working with consumer credit counseling?

Question

someone told me it's just a bad as filing bankruptcy.

Answer 1

Old school bankers and mortgage brokers are usually the source of that fib. They still believe that it is looked upon negatively on your credit. The truth is that Fair Isaac and Co, the inventer of the credit models, did a study 8 years ago. They found that people on a debt management plan were no likely to default that those that were not on a DMP.

From that point on, joining a DMP did not reduce your credit score. Many people do not know that the scoring models did change as a result of that study.

From a lender's perspective, they may still be leery about lending you money while you are still paying off debt through a DMP. However, you probably should not be taking on large obligations until you pay off your debt.

Most creditors make no notation on your credit file that you are on a DMP. Some, like Discover, do place a text notation. It may ready "repayment plan", or "CCCS" depending on the credit score model. Any notation is not factored into your credit score. In addition, once a debt is repaid, any notation is removed. Anyone pulling your credit at that point would see that you successfully repaid a large debt, and they would not know that you used a DMP to do it.

Nice to know the real truth, isn't it?!

Answer 2

The suggestions above are great for those who are not behind on their credit cards.

If you are behind, and the interest rates have been jacked up to 30% or more and your new minimum balance is 500 a month and you are getting charged over the limit fees, etc, then yes you should consider credit counseling.

Go with a non-profit organization approved by the BBB. Try www.takechargeamerica.com. I used them, as well as a relative. After about 6 mo-1yr on the program, my credit score started to climb climb climb. It doesn't hurt your credit as much as some will lead you to believe. I put 3 credit cards in the program, and only 1 made notation on my credit report.

It sure looks better than late payments every month!

Answer 3

It's a little bit better since you are still paying something. It will take a few years to get you back in the good graces of the the Credit Reporting agencies. However you do not have that nasty entry of BANKRUPTCY on your report for the next seven years.

I bought a house 8 years after going thru CCCS.. a Vehicle 2 years after and lived a totally cash existence for about 4 years before I even tried to apply for a credit card

Answer 4

Credit counseling is an alternative to filing for bankruptcy. Credit counseling does not come close to damaging your credit as much as filing for bankruptcy. Credit counseling is a good resource if you need help paying your credit bills, but there are drawbacks.

First, the pros of credit counseling. Credit counselors will call the credit cards you submit to negotiate a lower APR. I have seen people’s APR rate reduce to 0% during the pay off program. Credit counselors create a plan of paying off the credit cards you submitted. The counselor will work and encourage you to pay as much as you can in order to pay off the debt faster. You will know how long those balances will take to pay off. Finally, credit counselors bundle your payments into one.

The cons are having a credit Nazi monitoring your accounts. Those credit cards you submit for the credit counseling program are closely monitored. You must agree not to use those cards while paying them off. If you charge the smallest thing to those cards, expect a call from the credit counselor. Charging to those cards may drop you from the program, which your reduced rates will return to normal. Some credit counseling programs do not want you to open additional accounts. Credit cards, car loans, student loans, and home loans are all accounts. Opening one could disqualify you for the counseling program.

Answer 5

It's not as bad as filing BK, but many lenders will look at it negatively. On one hand, it shows that you are willing to repay your debts which will eventually improve your credit scores. But for the most part, lenders will look at this one of two ways. 1.) Not extend you credit because it appears that you are already over obligated and cannot currently pay your bills or 2.) Take into consideration that your working to repay your creditors and extend credit to you, but at a higher interest rate.

My advise is to contact your creditors yourself to make payment arrangements for a set monthly payment and stick to those arrangements. (if you cannot make a payment let the creditor know as soon as possible) Once you do that, take any extra money you have and apply it to the creditor with the lowest balance until it's paid off. Then move to the next lowest balance debt and add the payment for the paid off debt to the payment for this debt. Example: If you are paying $125 a month to Sears and $100 to Macys, once Sears is paid off, continue to pay the $100 to Macys plus the $125 you were paying to Sears. Your new payment to Macys will now be $225 which will allow you to payoff Macys faster. Once Macys is paid add the $225 payment to your next lowest balance debt and continue this until you've paid off you debts.

This will give you a much better credit rating than going to credit couseling.

NOTE: FOR YOUR CREDIT CARDS, ALWAYS KEEP YOUR BALANCE AT OR BELOW HALF OF YOUR MAXIMUM CREDIT LINE. GOING OVER HALF WILL LOWER YOUR CREDIT SCORES.

Answer 6

i worked the CCCS back in early nineties after an ex-girl friend destroyed my credit.

it was 5 or 6 years before i could get a loan or a starter credit card. I found it worse than bankruptcy.

i had 4 credit cards in counseling. The one that got me was Sears who put a quote on my credit rating that card was in counseling. it never came off.

so I was in college and got one of the starter-college-guaranteed credit cards and that got my credit rolling again.

JUST BE CAREFUL

http://www.info.darrenhale.net

Answer 7

I almost did that a few years ago. Right before I signed the agreement with them, I realized that I'm paying them to talk to my creditors. The rep I was working with started to pressure me after he realized I was second guessing the whole thing. I called all of my card companies and asked them if they'd lower my rates, some lowered them by half, and some lowered them close to 0% for 12 months. You should call your creditors first and see if they'll work with you. Mine did and I wiped out more than half my debt in a year....and I had a lot of debt!