subject: Credit Counseling – Warnings Before Entering Into Credit Counseling Programs [print this page] Credit Counseling Warnings Before Entering Into Credit Counseling Programs
You're deeply in debt, wondering which way to turn. You're confused, worried, and so stressed out you can't think straight. What do you do? Most people first think of the words "debt consolidation." Many people mistakenly turn to credit counselors.
Often people struggling with serious debt make the dangerous assumption credit counselors are "the good guys" because they advertise being "not-for-profit". Other times debtors lured by the debt management companies believe a common "half-truth" (out-right lie) promoted by the credit reporting agencies and credit counselors alike about how such debt consolidation programs affect your credit.
Do you know how your credit would actually be affected?
Before we look at the truth behind these deceptive claims, let's clear up the terminology and eliminate any confusion.
You see, "Consumer Credit Counseling Services" goes by many names but ALL of these different names are really the same thing. These many names include credit counseling, CCCS, debt consolidation, debt consolidation plan, debt consolidation program, debt management plan, DMP, debt management program, and of course the infamous "Non-Profit" Credit Counseling Program.
The Truth About How Credit Counseling Affects Your Credit
While enrollment in Consumer Credit Counseling Services no longer affects your numerical credit "score"*, being enrolled in "CCCS" has a VERY DAMAGING impact on your credit "worthiness." Credit worthiness is your ability to get a loan.
(* This is assuming that the credit counseling agency actually makes your payments on time which is often NOT the case, as many, many people who have mistakenly enrolled in such debt management plans report.)
Why does enrollment have such a damaging affect on your credit worthiness?
Statistics show it's most likely that you will never complete your debt management plan and will most likely file bankruptcy instead.
Some statistics report 7 out of 10 people who enroll into debt management plans fail to get out of debt.
Just ask ANY mortgage lender in the country
When pulling your credit report, EVERY ACCOUNT included in your "debt management plan" is listed just as a bankruptcy would be, with a notice under each account saying something similar to:
"THIS ACCOUNT IS INCLUDED IN CONSUMER CREDIT COUNSELING SERVICES"
This means big trouble for you. Lenders call this a "walking bankruptcy" because it's a *major red flag* indicating you cannot manage your money and had to hire a third party to do it for you. Plus, you still owe the debt and are at a much greater risk of filing bankruptcy in the near future.
How will these negative credit entries affect you?
You will pay much more in fees and interest rates, if you are able to obtain credit at all, during the 4-7 years you are enrolled in your debt management program.
