What You Should Know Before You Choose Credit Repair & Debt Relief Services
Debt can be overwhelming, and when bills pile up, many people look to credit repair, debt consolidation, or debt relief services for a solution. But not all options are the same, and some can lead to more trouble than help. BBB’s Financial Wellness HQ offers guidance to help you know what services do what, spot misleading claims, and protect yourself before making any financial commitment.
“When working to get their finances back on track, people often consider a range of options,” said Mechele Agbayani Mills, President & CEO of BBB Serving Central East Texas. “T Understanding how each one works is key to choosing the solution that best fits your situation.”
To help you navigate tough times, BBB breaks down some of the most common options people turn to when they’re struggling with debt
Credit Counseling. This solution is broad and could include budgeting help, educational programs, and advice from counselors. One common outcome is a Debt Management Plan, where payments are consolidated and made through an agency which distributes them to creditors.
Debt Relief (or Settlement). This involves working with your creditors to try to reduce the amount you owe through cutting fees, lowering interest, or reducing balances. Although individuals can handle this process on their own, many companies offer to provide the service for a fee. Go to bbb.org to find companies you can trust.
Debt Consolidation. This involves combining multiple debts into one loan or payment which could result in simplified payments and lower interest. This platform could have higher fees and could require putting up collateral (like using your home). Find a debt consolidation company you can trust by going to bbb.org.
Credit Repair. These companies assist consumers in correcting inaccurate credit report information. Keep in mind, accurate negative items cannot be legally removed by anyone. Find out more by reviewing BBB’s investigation of credit repair companies that fail to deliver on their promises.
When considering a solution, be on the lookout for the following questionable practices:
- Requests for money in advance, before any service is delivered.
- Guarantees like, “your debt will disappear,” or promises that your credit will be fixed immediately.
- Pressure tactics or unsolicited calls/emails offering special deals.
- Any suggestion that you should stop paying creditors or stop all communication with them.
Before subscribing to any program, keep in mind, under the Credit Repair Organizations Act (CROA) in the U.S., credit repair services must give you certain protections, such as a written contract, description of services, cancellation period, and disclosure of all fees.
For more information
For more on how to deal with debt, go to BBB’s Credit Repair and Debt Relief Services hub. The FTC likewise has additional resources on how to cope with debt. Please report fraudulent activity or unscrupulous business practices to BBB Scam Tracker. Remember, great businesses are out there. Always look for the BBB seal; it’s the Sign of a Better BusinessSM . Start with companies you can trust by going to bbb.org.
About BBB: BBB is a nonprofit, business-supported organization that sets and upholds high standards for fair and honest business behavior. Most BBB services to consumers are free of charge. BBB provides objective advice, free BBB Business Profiles on more than 5.3 million companies, 11,000 charity reviews, dispute resolution services, alerts and educational information on topics affecting marketplace trust. Visit bbb.org for more information. BBB Serving Central East Texas was founded in 1985 and serves 19 counties.
