Don't Get Spooked If Debt Is Haunting You Unless you're in the market for credit counseling, you probably haven't paid much attention to recent news stories depicting that industry as Halloween ghosts looking for a house to haunt. The Internal Revenue Service is investigating several debt management programs for abusing their tax-exempt status, charging excessive fees and paying executives outlandish salaries. The National Foundation for Credit Counseling announced that it welcomes the scrutiny because it will separate the good witches from the bad in the costume contest. And there are plenty of good witches prepared to help if debt is haunting you. Reputable credit counseling agencies negotiate with creditors on your behalf to consolidate debt, lower interest rates and remove fees for late payments. Your credit accounts will be closed and you'll pay the agency a pre-determined monthly amount, which it will then forward to creditors. We're frequently asked how credit counseling affects a person's credit rating, and the answer is it depends. A debt management program will show up on your credit report, and it's up to individual lenders to decide how that mark will affect future applications for credit. But if you have huge debt and are late on payments, your credit rating may have already suffered. The fact that you're seeking professional help won't matter over the short term and over the long term the only way is up. Be cautious when picking a program and start by avoiding those that run obnoxious advertising campaigns on television or the Internet. It may be a signal they're making too much money and the IRS is on their tail. Talk to a few agencies before deciding if possible, and pick one that spends quality time with you. The firm that offers you a plan in less than 20 minutes hasn't studied your financial picture and heard your concerns. You'll pay a reasonable fee, usually about $50-$75 to start plus a small monthly payment. Reputable non-profit firms will negotiate lower fees based on what you can afford. Pick an agency that doesn't promise overnight success. It takes time and effort to eliminate your debt--up to four years in most cases. Your debt situation didn't develop in a day, so you shouldn't expect a quick solution. If you're looking for a credible debt management program, we recommend you stick with non-profit firms affiliated with the National Foundation of Credit Counseling. Member agencies operate in major communities nationwide. We partner with one such group called Credit Counselors, and we've checked them out to be sure there are no ghosts in their closets.
