Credit counseling services: Helpful resources or scams?

On Behalf of | Jun 24, 2024 | debt relief |

Sometimes, people get in over their heads financially due to a lack of resources or education. They may have been unaware of that balance transfers can lead to a large amount of interest applied to an account all at once, for example. Seemingly minor financial mistakes can end up having major implications for a household budget.

Credit counseling services help connect people with support to address their financial challenges. For some people, credit counseling services can be majorly beneficial, as they can regain control over their budgets and make better choices in the future. Other times, credit counseling services can be a cover for an attempt to scam consumers. Companies may trick consumers into taking on more debt and paying fees that they can’t afford.

What are the warning signs of fraudulent services?

Consumer protection agencies recognize that credit counseling scams are a concern. They highlight several behaviors that may indicate a company is not acting in the best interests of clients. One involves encouraging those struggling with debt to challenge every record and blemish on their credit reports. Raising questions about inaccurate and invalid entries on a credit report can be a smart move. Challenging valid debts and judgments can waste someone’s time without yielding positive benefits.

On the other hand, a credit counseling service that tells someone to avoid checking their credit report could be equally questionable. Consumers need to understand what shows up on their credit report and how they can correct what other parties report to the credit bureaus.

Companies that insist on receiving sizable upfront fees might also be scams. Consumers should only pay after receiving services, possibly as part of a lengthy repayment plan. If the company promises to remove valid negative information from someone’s credit report, that could also be indicative of a scam. Companies should be open and honest about their services and the rights of their clients.

Oftentimes, credit counseling services attempting to defraud consumers offer services including debt consolidation or debt settlement. The goal is to convince someone to assume alone issued by the credit counseling company or an affiliated business. Those loans may potentially have predatory terms that may eventually worsen someone’s financial circumstance.

In many cases, personal bankruptcy can be a more viable and permanent solution for debt than credit counseling and other so-called debt relief opportunities. Recognizing that some services are scams can help to protect consumers from companies that do not have their best interests at heart.