Don’t fall for the come-ons. These offers are often rip-of s and can do serious damage to your credit score and leave you in more debt than you started with. I know how tempting it sounds when you hear an ad that tells you the Super Duper Debt Consolidation Co. is standing by to make all your credit card debt stress go away.
| What they don’t explain is that they typically charge you 10 % or so of what you owe to take on your case, and in the event they work out a set element with your creditors, they are going to want another 10 % or more of the amount they “saved” you. And I promise you, these debt-consolidation companies aren’t going to spend a lot of time explaining to you that any set element they negotiate for you will ruin your FICO credit score and may end up costing you income tax on the amount of debt that is forgiven. Most troubling is the growing number of complaints in 2008 that debt-consolidation firms collected their initial fee and then did nothing for the consumer. Not only were the clients out their fee, their FICO scores were hurt even more because the debt-consolidation firm told them they were taking care of the payments and the set element. |
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| In reality, nothing was being done, so the amount owed ballooned as interest rates were raised and penalty fees piled up. |
| There is no easy way out of debt. Anyone promising to magically make everything all better is either lying to you or not explaining the financial and credit costs of what they are doing. |
