Despite their great claims to eliminate your negative records or improve your credit score in a short time, credit counseling agencies, credit repair companies, and debt consolidation agencies can be severely damaging to your credit, and your wallet. The business of credit counseling is worth an estimated 7 billion dollars a year. These companies can charge you on a percentage of your debt or demand a large setup fee. If you are seeking credit counseling, odds are that you'd rather apply that money directly toward paying off the debt itself. Be sure to consult the fine print and know what kind of payment basis you are committing to.
Bear in mind that when a credit repair agency steps in to mediate between you and your creditors, you will still be held fully responsible for your outstanding debt. An unethical but common practice of credit repair agencies is to keep your first round of late payments for themselves. This may create or add to a record of late payments that can remain on your credit report for several years. If you decide to work with an agency, it's wise to periodically check your credit report to make sure that payments are being made on time.
What many people don't realize is that you have the power to do for yourself all the things that a credit repair agency can do for you. You can negotiate a payment plan directly with your creditors, reduce your debt, and improve your own credit score or get your finances back on track. The money that you would spend for the assistance of an agency can be used to pay down your debt. If you are trying to remove erroneous negative information from your credit report, see the section below on disputing errors.
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