- 4 min read
- Credit Consolidators deal with different debt relief programs, including credit counseling and debt management.
- Use Bills.com Debt Coach to find the right credit consolidation program for you.
- Look for industry affiliation and accreditation.
Credit Consolidators - Sifting Through the Sand
Sifting through advertisements, online pitches and flyers soliciting you to sign up for a credit consolidation program is a daunting task. Well, maybe not as difficult as searching for treasure in the sand, but still difficult.
Being in debt is stressful and leaves you vulnerable for fast and quick solutions, which unfortunately do not exist. It takes hard work on your part to get debt free. The truth is that debt relief solutions and reliable credit consolidators do exist. You want a reliable credit consolidator on your side.
Credit consolidation comes in different shapes and sizes, depending on your financial situation. You can consolidate debt through a bankruptcy using a bankruptcy lawyer, or a loan through a bank or credit union. This article deals with two major categories of credit consolidators, credit counseling and debt settlement companies and finding a comprehensive list of credit consolidators.
The first step you need to take is to educate yourself about debt relief programs. Bills.com created Debt Coach, an innovative tool that helps you analyze your financial situation and recommends a debt relief option best for you.
Credit Counseling Credit Consolidators
Credit Counseling involves two steps, a budget review and analysis of your debt problem, and a debt management program. The credit consolidator negotiates with your creditors, mainly credit card companies, a lower interest rate and fee. You make one payment into a special account, and the consolidator transfers the money each month to your creditors. A consolidator takes an upfront fee and a monthly charge.
The NFCC (National Foundation for Credit Counseling) and the AICCCA (Association of Independent Consumer Credit Counseling Agencies) both have websites with comprehensive lists of their members, who are non-profit credit counseling companies.
NFCC: The NFCC claims to be the nation’s largest financial counseling organization providing credit counseling, financial education, and bankruptcy counseling and housing counseling services. According to its Web site, "the NFCC Member Agency Network includes more than 750 community-based offices located in all 50 states and Puerto Rico". You can find a NFCC member by telephone or an internet based form. The main advantage, although not a guarantee of good service, is that the NFCC requires that all its members have a COA (Council on Accreditation) at least every four years.
AICCCA: The AICCCA claims to be the largest national association representing non-profit credit counseling companies. Their members also provide similar services as the NFCC, including bankruptcy, housing, and credit counseling. The AICCCA also requires accreditation and sets a standard of conduct code. Their Web site provides a search engine by state to find a credit consolidator.
Debt Settlement Consolidators
Debt Settlement is a more aggressive form of debt relief, where you stop paying your creditors and make payments into a special designated account. (Make sure that the account is in your name and in a FDIC account). The consolidator negotiates a settlement with your creditors. When the consolidator reaches a settlement and transfers money to the creditor, only then should you pay a fee.
In 2009-2010, the FTC issued new ruling regarding telemarketing solicitation, in an attempt to sift out companies using unethical business practices. The new rule outlawed those firms from taking upfront fee, although loopholes exist that allow firms to get around this rule.
In order to find a comprehensive list of reputable debt settlement credit consolidators, the AFCC (American Fair Credit Council) is a good place to start. AFCC: The AFCC is the main debt settlement trade organization. According to the AFCC Web site, there are 15 accredited members and 25 regular members. The accredited members agree to go through a yearly onsite audit. The AFCC has strict standards, including adherence to the FTC ruling that the credit consolidator does not take any fees before reaching a settlement with the creditors.
Quick tip #2
Get a free consultation from one of Bills.com pre-screened credit consolidators.
Finding the Right Credit Consolidator
Many firms promise to solve your debt problems, offering a variety of solutions. Not only is it hard to find the right program, but also the best credit consolidator. Affiliation and accreditation are not guarantees that you will get good service or find a solution to your problems. It is a good first step to sifting out the long list of providers. For more information read the Bills.com about choosing a reliable credit consolidator.
Dealing with debt
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q3 2023 was $17.291 trillion. Auto loan debt was $1.595 trillion and credit card was $1.079 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
The amount of debt and debt in collections vary by state. For example, in Utah, 19% have any kind of debt in collections and the median debt in collections is $1943. Medical debt is common and 12% have that in collections. The median medical debt in collections is $980.
To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.