Consumer Credit Counseling Services (CCCS) around the country. The toll-free number will automatically link you to a CCCS in your area. That’s the path Harrison followed when her debt burden became overwhelming. “The counselors called my creditors and arranged for me to stop paying interest, which had been 21% on some accounts,” she says. “Then my bills were consolidated. Instead of eight payments for a total of $525 per month, I only had to make one payment for $325. As my income rebounded, I increased my payments to $425 per month.”
“We have agreements with many creditors,” says Shetti Goss, vice president of CCCS in Atlanta. “If creditors know that a debtor is working with us, they might agree to reduce or even waive interest payments. They also may decrease the minimum amount that they require each month. Once we get payments from our clients, we send the money to each creditor, and we send our clients statements showing their progress.”
How does this activity affect debtors’ credit reports? “Essentially, we shut down their credit when they work with us,” says Goss. “Their credit reports will show that they are in ‘payoff status’ and in financial counseling. After they’ve paid off their debts, we help them reestablish their lines of credit.”
Sometimes, it’s not necessary to wait until debts are completely paid off–the Harrisons were able to get a home mortgage while still in the CCCS program. “We had to go to a couple of mortgage companies, but we did find one that would lend us money,” says Harrison.
Goss is not surprised. “Consumers today have a lot of options as far as credit is concerned,” she says. “Lenders frequently ask us about our clients, and we report how they’re doing. In some cases, lenders feel our clients are good risks.”
TAKE CHARGE OF YOUR CREDIT
Take care of outstanding bills right away. If you’ve been diligent recently, previous transgressions may be overlooked. “Most lenders look at the most recent information on a report,” says Yates. “If you’ve paid your accounts on time for the last two or three years, the lender may ignore a series of late payments from five years ago.”
Information generally stays on your credit report for seven years. (Bankruptcy information can be retained for 10 years for Chapter 11 filings or seven years for Chapter 13. However, there’s no time limit on information that may be sent if you apply for a job paying more than $75,000, or life insurance for more than $150,000.) In practice, though, 1991 problems won’t be critical if your report shows a good record in 1997 and 1998.
If you pay your current bills reasonably well, you’ll likely be deemed creditworthy by someone because not all creditors have the same standards. “We don’t provide credit ratings on individuals,” says Mooney. “We sell credit histories. Once a creditor sees those histories, it makes its own decisions about extending credit. One bank, for example, might deny you a credit card because you have some late payments on your report.