1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair
2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% -
3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.
How Are Non-Profit Agencies Different?
For an organization to gain “non-profit” status, they must exist solely to provide programs and services for the public’s benefit. All earnings are retained to continue those programs and services, rather than being used to pay off individual shareholders. Often these agencies are tax-exempt and eligible to receive tax-deductible donations. They are also exempt from Consumer Protection Laws in some states.
In addition to receiving money through charitable contributions, government grants are another way for non-profits to remain afloat. Non-profit credit counselors generally work with individuals to improve their financial situation through budgeting, problem solving and saving methods.
Video: What Are Non-Profit Credit Counselors and Consolidators?
What Services Do Non-Profits Provide?
Non-profit credit counselors can provide practical assistance with the everyday aspects of finance. Consumers come in with all kinds of questions. They wonder how they can create a monthly budget, how they can cut back expenses, or whether they should consolidate their debts to pay them off quicker. Some people may be considering re-mortgaging or taking out a home equity line of credit but have a few questions. Some people come in for additional information regarding credit card interest, fees and statements. These professionals are trained to examine consumer records and point out places where consumers can save money, as well as strategies on how to pay down outstanding debt.
Non-profits are the lifeline for consumers in crisis. Many non-profit credit counselors can stop harassing phone calls from creditors, negotiate with creditors, consolidate payments into one affordable monthly amount, prevent utility shut-offs, halt foreclosure proceedings and provide credit reports. They can advise consumers whether they should try a do-it-yourself approach with a consolidation or debt management plan, try to reduce debts with debt settlement or just outright declare bankruptcy.
Do Non-Profits Charge For Their Services?
Often consumers can find a wealth of free information on a non-profit credit counselor’s website. In-depth articles, worksheets, budgeting calculators, FAQs, videos and other useful items are offered free of charge to interested parties. This is all part of the philanthropic nature of the non-profit company.
However, once consumers choose to enroll in a particular program – be it a Debt Management Plan, a Debt Settlement agreement or a Debt Consolidation service – they will be charged a low fee. Naturally, government grants can’t possibly cover all the expenses of running a company. However, the rates charged by non-profits are generally far lower than what private companies charge for the same services.
Are Non-Profits Safer and More Trustworthy?
In rare cases, there are nefarious non-profits using the status as a tax shelter, paying their executives upwards of $300,000/year and over-charging the consumer. A company should not be trusted solely on the basis that they are labeled “non-profit.” A diligent consumer will check with the appropriate agencies to look for past complaints, lawsuits or other red flags.
Do Non-Profit Credit Counselors Loan Money?
In some cases, consumers can borrow money directly from a non-profit credit counselor to pay off outstanding debts. This type of loan is called a “debt consolidation” loan, where the company pays the creditors up front and collects a reasonable monthly fee from the borrower until the debt is repaid. These loans are not always easy to get, as they require a decent credit score.
In other instances, the debt is still consolidated and reduced to one affordable monthly payment, but the money from the borrower is placed into a trust fund and used to gradually pay off all the creditors. This method still simplifies the debt repayment process, stops fees associated with late payments, boosts credit scores and reduces interest rates significantly.
What Are Advantages / Disadvantages of Non-Profits?
The primary advantage of working with honest non-profit credit counselors is that they truly have the consumer’s interests at heart. Generally, they’re not out to make a quick buck as much as a private entity might be. They seek to provide valuable information for the public’s benefit, reduce balances and negotiate better debt repayment plans to help borrowers keep their heads above water. The fees are generally very low and customer service is friendly.
The disadvantage of non-profit counselors is that some of the most unscrupulous profiteers look at “non-profit” status as a way of evading consumer protection laws and tax requirements. These shady companies may engage in other illicit practices that will rob mislead consumers, rob them of their money, keep them in debt longer and damage their credit scores in the process.
Video: Who Regulates Credit Counselors?
What You Should Look For In Non-Profits:
- Affiliation with the Association of Independent Credit Counselors Association (AICCA) or the National Foundation for Credit Counseling
- A clean Better Business Bureau record
- No complaints with your state attorney general
- Approval by the United States Trustee Program
- Involvement in charitable activities
- Excellent customer service
- A good reputation
- Reasonable prices
- Free educational materials
- Tips on money management and budgeting
- Specializations in your area of need
- Certified counselors
- No monthly service fees more than $50
- Plans that will get you out of debt in 5 years or less