The next problem I have found with most of these programs is the issue of due dates.
Based on your monthly ritual of paying bills, you already have a really good understanding of due dates. Every credit card you have has a different due date and maybe even different grace periods. This is one reason why people end up seeing themselves juggling their money around every month.
Well these programs run into a similar issue and most programs I have seen only distribute money ONCE a month. Let’s pretend that your distribution date with the program is the 15th of every month. Accounts that are due after the 15th being paid on time but what happens to the accounts that are due before the 15th? This could potentially be devastating to your credit rating.
Basically from the first payment you make into the program you are late every month until the program is finished. Which it usually lasts from 3-5 years. 3-5 years of late payments without your knowledge. By the time you are done with the program you think you should have great credit because you paid into the program on time for years just to find out how very wrong you are when you finally order your credit report because you would like to make an important purchase like a home or a car.
I have heard of some companies working on the consumers’ behalf to get their due dates changed to match the distribution date. This is a very good practice and a very good question for one to ask when going into one of these programs. Can a company prove it that is has arranged the change of due dates? I don’t know but it will show that you are prepared and know some of the stumbling blocks that these programs can create.
The second is an easier fix in theory but a more difficult one in real life. Before you get completely into the program just make sure that all your credit cards are paid 1-2 months in advance. This will take a little more work on your part. You need to call and arrange the payments, then verify that the payments you made were allocated towards actual payments and were not used to reduce the principal. Which can very easily happen if you are not crystal clear with your message, by crystal I mean mention it ten times in your call with the rep from the credit card company, have them write down on the account notes, include a note with your payments making it clear what it is that you want them to do with the payments and also write it on the check that you send in. You want all the back-up that you can have in case anything goes wrong.
By having a 1-2 month cushion you will usually cover the time it takes for the program to get up and running and from then on, if they make the distributions every month and on time you SHOULD not have any late payments and thus come out the other side with your credit unscathed.
The problem of course being that this is a program that is geared towards people that may be overwhelmed with their payments to begin with.
This is the time to call that family member that can save you.
When it comes to asking a family member for money I have some good news and some bad news.
The good news is that you technically will be paying less money into the program than you were before the program, so the family member knows you have some disposable income in order to pay them back.
More good news, if there is a hiccup in paying back the family member, it won’t affect your credit
The bad news, good luck finding a family member that will lend you money when they know you are having financial troubles.
You never know!
I hope this series cleared up some of the potential issues that can arise. Feel free to comment if you have any further questions or comments. I enjoyed writing this series as I hope you enjoyed reading it.
Feel free to share it with your friends on facebook, twitter or the social media site of your choice.
I appreciate your visits and your comments.
To Your financial success!
P.S. If you liked this information, you will love my series on credit report and scores. It will show all the ins and outs of how to obtain and maintain a good, strong credit score now and in the future.
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25. May 2010 at 9:46 AM
Jose,
You always share such pertinent info about credit issues. I would never have thought about the due date issue. Good point to consider! Hopefully this will assist some who are looking into this plan so they will be well-informed before any problems occur.
Thanks again for sharing your knowledge,
Val
.-= Val Wilcox´s last blog ..Clarify the Right Relationship with Yourself =-.
[Reply]
Caraballo & Associates Reply:
May 25th, 2010 at 9:15 PM
Key phrase in your comment “before any problems occur”. I think this is one of the most important points anyone can make.
Thanks for commenting and your continued visits.
Hope to share with you again soon.
[Reply]