During my tenure as a debt collector, I worked with debt management companies and CCCS agencies quite a bit, albeit a bit indirectly. However, I learned several things about what those companies do to help consolidate loans and the role they play in restructuring personal debt. Especially when it comes to credit cards or other high-interest-rate loans, CCCS agencies offer some valuable benefits to help consolidate debt, but I can’t say I recommend this approach if you’re serious about getting out of debt. Why?
CCCS is debt consolidation. Is this bad? Maybe not, but think about this. You’ll be expected to pay the debt management agency/CCCS company a lump-sum payment that they will then distribute to your creditors. As long as you can afford that single large payment to CCCS, this is fine. But what happens if you can’t scrape together enough cash? Trust me, if you don’t pay CCCS, they won’t pay your creditors. That means missing one CCCS payment might mean you miss a bunch of payments with your creditors. …And by the way, once you’ve committed to make your payments to CCCS, your creditors won’t take a payment from anyone but them and CCCS usually won’t make a payment to anyone unless you’ve paid them the full agreed-upon amount.
Another reason I struggle to recommend CCCS is that with any form of debt consolidation, your general aim is to lower your monthly out of pocket expense on your debt because you’ve gotten strapped to make all those payments. The problem is, if you simply relieve the stress of your budget without changing the behaviors that got you in trouble to start with, you end up deeper in debt and make it much more difficult in the long run to get yourself out of debt.
Your credit score will probably take a hit. I dedicated an entire chapter in my book to why I don’t care about your credit score and why you shouldn’t either, but I don’t want you to do something that will purposefully hurt your score. If you’ve read anything I’ve written, you already know I teach you to behave with money and let your credit score take care of itself. However, when you start working with CCCS, your credit report will usually reflect that you’re “enrolled in debt management”. If your credit is in terrible shape, this may not be a bad thing, but it is not good for your score.
So what is a better way? I’m glad you asked. I believe you need to battle it out! You took on each of those debts and I firmly believe you can do just as well battling each of them to work your way out. Using Dave Ramsey’s Debt Snowball method and being diligent with a real budget will do wonders in helping you beat your debt for good.