Consumer Credit Counseling – The world’s best sales pitch
March 16th, 2007 by Mark FlandersDid you know that many mortgage lenders view Consumer Credit Counseling as worse than bankruptcy? It’s true. Getting a mortgage loan approval for a client who has a bankruptcy is easier than getting an approval for a client who has been in a Consumer Credit Counseling program.
The revolving debt nightmare is faced by many Americans everyday. An entire industry has developed because of it. As with any industry, there are some good companies, many mediocre companies and too many very poor companies. In this industry, the mediocre and poor companies can make a bad situation significantly worse. The impact of this mediocrity shows up on your credit report. While you believe all your credit problems are under control, the reality is often quite different.
THE PITCH – When you see commercials for consumer credit counseling, the sales pitch is amazing. “Consolidate your bills into one low monthly payment!” “Never worry that this credit card bill can’t be paid or that other payment will be late.” They promise that you will make one affordable payment to the credit counseling service, and they will divert the funds to all of your creditors as necessary to keep everyone satisfied. You will have no more bill collectors calling you daily, hounding you for payment. Is it to good to be true? Should you consider other alternatives? What are the alternatives?
WHAT HAPPENS – The way a credit counseling service consolidates your bills can actually be more damaging than helpful. Initially, the service will have you collect information on all of the bills you wish to consolidate. You turn this information over to them. They will request information on your income and help come up with a monthly payment that you can afford. They will then contact your creditors, inform them of the consolidation, and set up slow payments. This will get the bill collectors off your back and usually stop compounding of interest on accounts, but it can also affect your credit. Also, rolled into this payment is a fee for the service that the consumer credit counseling service keeps for itself.
REALITY CHECK ON YOUR CREDIT – Understand that, if you allow the counseling service to “slow pay” your creditors, your credit score will be reduced, and your credit report will be severely tarnished. While you will live more comfortably, knowing that all creditors are receiving payments, no one is hounding you for money, and you can afford your monthly payment, your creditors are reporting you as either a “charge off” or a “slow pay” to the credit bureaus. A charge off is the worst rating you can have on a credit line. Slow pays show up as current activity while you are in credit counseling. This information is rarely disclosed by Consumer Credit Counselors.
This article may be disturbing if you have been considering Consumer Credit Counseling. The point of the article is not to cause you concern, it is simply to make sure you are informed. There are other solutions to the debt trap. Consumer Credit Counseling is just one of the possible solutions. It is by far, in my opinion, the most heavily adveritsed solution.
You can find alternative solutions on this site as the site develops. These alternatives will all be in the Credit category that you can jump to from the sidebar.
Share on Facebook
Tags: bremerton real estate, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate
An adjustable rate mortgage (A.R.M.) is one of the most popular options available to both home buyers and homeowners considering a refinance. Many borrowers do not fully understand the concept of an A.R.M. and as a result may be somewhat hesitant to pursue this type of a mortgage. There are some situations in which an A.R.M. or a hybrid mortgage can be the best mortgage solution for a homeowner who is in the process of refinancing. This article will focus on explaining the concept of an A.R.M., explaining situations where it is the best solution, debunking the most popular misconception regarding A.R.M.s and explaining how those with bad credit can benefit from an A.R.M. At the conclusion of this article you should have a better understanding of A.R.M.s and may want to investigate this option further.
One of the most popular types of adjustable rate mortgage is the hybrid mortgage. Hybrid mortgages typically have one component which is fixed and one component which is adjustable. These types of mortgages may have a fixed rate for a set number of years. The don’t truly begin to vary until after this initial period. Alternately, a hybrid loan may be variable for a number of years and then become fixed after this initial period.
I believe most people are basically honest. Sure, we cut corners at times. We deduct items on our tax returns that may not be quite legitimate. We call in sick to work when we just want a day off without having to explain the true reason. Most people though, would never think of robbing a friend, or lying to their children.
What I see happening all to often is this. A client meets a Loan Officer and brings along all the requested paperwork. The client arrives with bank statements, tax returns and paystubs. The Loan Officer proceeds to enter data into a computer program prior to printing up paperwork and finds that the client’s income is too low to fit the loan guidelines. One of two things happens at this point. Either the client asks, “Well can’t we just get a Stated Income Loan?” or worse, the Loan Officer says “This won’t work, we’ll have to go Stated Income”. The client might have a defense, if they don’t understand what these loans are for. The Loan Officer has no defense.
Is there EVER a good time for a flat tire? It’s happened to all of us at some time or another. And it always seems to happen at the most inopportune time and place, right? You’re cruisin’ around out in the middle of absolute NOWHERE and “POP!” your tire blows! (This is when you discover that your spare is also flat, is one of those really small junior size, embarrasing tire wannabes, or maybe it’s missing altogether)
“Beauty is in the eye of the beholder” or so the saying goes. The perception of beauty can be applied to Real Estate. I am referring to the rundown, lawn-overgrown, plywood-covering-the-windows, missing shingles and grafitti decorated houses that can be found in many neighborhoods. You know the one I am talking about. It has had 7 different real estate signs in the front yard in the last 3 years, but still sits vacant. It has trails through the tall grass where the local kids have their shortcut paths. Several cats seem to live on the grounds, but nobody knows for certain how many. And if you listen to the big kids talking to the little kids in hushed tones, it is haunted.
Did you know that Uncle Sam is just waiting to ride to the rescue on properties like this? These dilapidated homes are an opportunity waiting for both the enterprising fixer-upper buyer AND the Realtor® who will think outside of the box. Not only is Uncle Sam waiting to help, he’s willing to offer help with low interest rates, reasonable closing times, reasonable closing costs and approval of the whole transaction is based on what the ugly house will be worth after it’s finished! Repeat after me: “America is the best county in the world”.
