Published November 29, 2012
Dear Debt Adviser,
We need to consolidate our credit card debt. Do you know any trustworthy agencies that can help? Our payments are so high that we're struggling to pay down more than the interest. What would be the smart route to take? We're both nurses with two kids and a house for one year. Please help!
Dear John, You can trust a nonprofit credit-counseling agency that is a member of either the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. Both of these organizations have consumer protection standards that their member agencies must follow. When you contact an agency that belongs to one of these national organizations, you'll speak to a certified credit counselor who will help you assess your situation. The counselor can make recommendations on how to move forward, based on your goals.
From the brief information you have included, it appears that you may solve your problem with some budgeting and negotiation tips or with a debt management plan. Here's a quick overview of what to expect.
With a debt management plan, you'll make one monthly payment to the credit-counseling agency, and it will use that to pay your creditors. You will continue to receive monthly statements from your creditors indicating your payment and your balance. When you enter into a plan like this, your creditors will require that your accounts be closed. Most creditors will report to the credit bureaus that the accounts are part of a debt management plan. This will not affect your credit score, though some lenders view these accounts negatively.
Your credit rating may take a slight hit with your accounts on a debt management plan. But the positives of paying off your debt should outweigh that possibility. Plus, once you finish, the debt management plan notation will disappear from your credit report immediately.
Copyright 2012, Bankrate Inc.