4 Signs a Credit Management Program Is a Scam

A credit management program is designed to help you get out of debt and save your credit score. These programs are aimed at individuals with high levels of debt who fear they may be unable to resolve the debt independent of assistance. The credit manager will, ideally, pay the creditors, either in full or in part, in order to suspend collections. In turn, you pay the credit manager. Ideally, the sum you end up paying is lower than what you originally owed. However, this is not always the case. If you are working with an unethical agency, you may spend more than necessary, and your credit may also suffer. 

1. Up Front Fees

One red flag to look out for is an upfront fee. If you contact a credit management company that requires a percentage fee prior to doing any work for you, it may be a good idea to walk away. While membership fees are common, you should always know exactly what you are getting for this fee. Further, if the service does not actually assist in reducing your debt, you should not have to pay the fee. For this reason, any upfront fee may be a sign of a scam.

2. Lack of Association

There are many self-governing bodies in the credit repair industry. These organizations, such as the National Foundation of Credit Counselors, have standards each member must meet. If a member organization is not meeting the standards, it will lose its affiliation. Ask any potential credit management company if they are a member of an accredited organization. Even an association with a Chamber of Commerce or Better Business Bureau is promising. If the company you are considering has no allegiance with any organization, you may consider electing to work with a different company.

3. Consumer Complaints

Do your research through consumer reviews. One place to start looking for a good credit counselor is through friends and family. Do not be embarrassed to ask; you will likely learn many of your friends have gone through a credit counseling program. Ask who they used and what their experience was. If you speak with someone who had a bad experience with a certain credit management program, avoid that program. If you do not find helpful reviews in your inner circle, look for online reviews of an agency. Ask if you can speak with a satisfied customer. Contact the Better Business Bureau or another association to check on the organization's status. 

4. Lack of Communication

One of the biggest red flags to look out for with a credit management scam is lack of communication. Does your counselor have a permanent phone number, accessible during most hours of the day? Is there a responsive email system? If you needed to, could you schedule a meeting and talk with your program adviser face-to-face? If the answer in these areas is not satisfactory, then do not work with the agency. You may find agencies located overseas or without physical addresses, and this is a sign you may be walking into a scam.

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