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| The Pros And Cons Of Credit Counseling |
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In understanding how credit counseling may affect your credit status, it is
important to know the differences between credit counseling and actual debt
repayment programs.
There are definite differences between credit counseling and debt repayment
plans in regard to long-term effects. With credit counseling, there is no
signed commitment, none of your accounts are affected by the agency itself,
and you retain total control of how your debts are paid and when.
In addition, credit counseling in no way affects your credit rating and does
not show up on your credit report. But because there is no signed commitment,
the agency must leave the repayment of your debt in your hands, which may
leave you exactly where you started-overwhelmed with the burden of going it alone.
With a debt repayment plan, your credit status may be affected by the plan
itself. Creditors may report that an account is in a debt repayment plan,
that some payments (if any) have been missed, or that there are write-offs
or other concessions that have been made to help reduce your debt to a
workable amount. Under the Fair Credit Reporting Act, this accurate
information about your accounts can stay on your credit report for up to seven
years. In addition, your creditors will continue to report information about
accounts that are handled through a debt repayment plan. However, if you can
avoid filing bankruptcy, a debt repayment plan may be worth the trouble.
Remember, write-offs and late payment notations may stay on your credit report
for seven years-a bankruptcy can stay on for up to ten and is a matter of public
record as well. This means that in addition to having individual account
notations, you will also have the notation of the bankruptcy listed separately
on your credit report.
For more information on debt management, you may wish to visit our web site at
www.creditmatters.com/channels/debt_management.asp.
Copyright © 2000, CreditMatters.com
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