Credit Counseling- Why To Avoid It And What To Do
Credit Counselors Are Scams- How To Avoid Them and Do It Yourself
For the past nine months I have been living in anticipation of being qualified to purchase a home. I have struggled in the past with my credit and I turned to a Credit Counseling Agency called Camden Credit which promised me that they would repair my credit and have me approved to purchase a home within six months.
I paid Camden Credit $1500 (I understand now that they charge $2000) up front to get to work on invalidating some of the problems on my credit report. There were some things that shouldn't have been there and there were some things, like medical bills, that could be disputed. Camden Credit had a salesman call me and I was very hesitant at first. He assured me that 'teams of lawyers' would work hard to get bad reports off of my credit and all I would have to pay was $1500. I was desperate and I really wanted to clear up my credit so I ended up signing a contract with them.
The first thing they made me do was pay Wells Fargo credit services $15.99/month to see my credit scores. They were supposed to pull my scores each month, however my 'Credit Counselor' mostly ignored any questions and so I ended up pulling the reports myself. All they did was dispute every single thing on my credit report- even my car payments which I've never missed, and my credit card bills. No one at Camden Credit could give me a written update and no one knew what was going on, and I found that my credit scores actually kept getting worse.
I decided to take a proactive role in trying to repair my credit because Camden had promised me the world but really just took $1500 from me and didn't correspond. I kept getting letters in the mail from various credit reporting agencies telling me results of my dispute, but I noticed that again, things I was not disputing were showing up.
When I started to really get upset and frustrated, I threatened my 'representative' at Camden Credit that I wanted my money back and I wanted to speak to her supervisor. She called me back right away and appeased me by telling me that the three scores I got each month from Experian, Equifax and TransUnion were going up, and my 'middle score' just had to be 620 and she'd get me approved. She also told me that I should open a credit card and this would have improved my score. She told me this 7 months after I paid her $1500. She also said that medical 'didn't matter.'
Well- I paid off a LOT of medical bills and opened a credit card, even though Camden told me not to pay medical bills, and my scores went up to 647, 639 and 632 respectively. I was very excited and Camden Credit sent my 'packet' over to one of their lenders. He called me back right away to tell me my scores were 45 points too low for approval. 45 points. I asked him what the heck he was talking about, and he said that Camden and other places use consumer scores and not FICO scores, and try to hurry the process along, often hurting you instead of helping. I was devastated.
I have submitted a complaint to the BBB to get my $1500 back because they wouldn't talk to me about it, and needless to say Camden Credit has a score of F- and they are not BBB accredited. I will probably never get my money back. However, I did learn an important lesson and I learned some things I want to share.
When it comes to credit repair, there are some fairly simple steps to follow to improve your scores.
- Don't pay a credit recovery service
- Get your report once a month and monitor every single thing that comes up on it. If something shows up and it's a debt you owe and you can pay it- then pay it. Always ask for a receipt so you can send it to the correct Credit Bureau and they can mark it as paid or take it off your report.
- Go online or call Experian, TransUnion, or Equifax. They all have phone numbers and they are all very polite and very helpful. They will tell you how to send in a receipt online so they can take a debt off your report immediately.
- If you can't pay off a judgement at once, call and make payment arrangements. Creditors looks much more favourably on people who have been making consistent payments on judgments than those who ignore them and wait for them to go away. Judgments will not go away, you must pay them or make arrangements to pay them.
- Regardless of what people tell you, medical DOES count. Try to get medical bills paid off if you can. You can call and offer a settlement amount but if your amount is less than $500 than you originally owed, you may be dinged on your taxes- so if you can pay them in full or make arrangements, it's better.
- Don't ever have a balance on your credit card of more than 30% of your limit if possible.
- Don't be late on your credit card payments. A minimum payment is better than a late payment.
- Don't make the mistake of thinking that having few credit accounts is good. You should have around 12 if possible- car payments, credit card payments, student loans. Your length of credit history and amount of accounts is a plus.
- Credit Counselors are not qualified to tell you what to do with your credit and they do not care. A lot of credit counselors will take off a debt for 30 days and it will just resurface. They are not worth the time, consideration, or money.
- Keep a constant eye on your credit report and keep in constant contact with the three bureaus on everything you've paid or any changes.
- Don't open store credit cards. Mastercard/Visa/Discover/Amex look good on credit reports. Store credit cards do not.
- The more you pay in equity on car payments, the higher your credit will raise- so if you make double payments if possible it will raise your score faster.
- When looking for a job, try to find a job you like and stay at it for more than a year. Job stability is a big factor with credit companies.
One thing that you may not know- if you don't have enough open revolving credit lines, your credit score will be much weaker. Gone are the days that you shouldn't have open credit cards. You should have at least three with low balances. The lower the balance, the higher the credit limit, the better your credit will be.
Remember- FHA loans are so much easier to get with less down payment. Your consumer reporting scores are NOT your FICO scores. Your FICO scores will be much less. You should try to keep an eye out for both.
The only real FREE credit reporting agency is CreditKarma which is not going to be perfect but it is an excellent indicator of what is happening to your credit scores. I recommend getting an account. You can check your credit once a week. It will show you if your scores are going up or down, and it's very indicative of what your 'real' scores are doing.
Don't fall prey to credit counselors like I did. Take control of your credit and tackle it head on. It's so much easier, and you could be using the money to pay off your debts instead of making them profit for nothing.
Hope this was helpful!