First, what is a credit card debt consolidation company and what do they do?: Well, contrary to the advertising they are rarely nonprofit and you will have to pay a fee to use them. It usually works something like this…they negotiate payments with your creditors and take the first two payments intended for your creditors for themselves. Then, they inform your creditors that they will start sending payments in the third month and you pay them one amount and they distribute it. Usually most creditors will drop some fees or interest, but you may suffer for it.

See, one of the ways that these debt services get creditors to drop off the fees and interest is by telling them that you have no way to pay the debt otherwise. This may cause the creditors to report to the bureaus that you are missing payments when the debt services company takes the first two payments or even to report that you are working with a debt management company. This may cause you to have problems getting approved in the future because companies will not to work with someone who could not handle their debt the first time, and they will know that your past creditors missed out on some interest.

Another thing that you should know before you go into the office is that you can do real damage to your credit report by waking sleeping giants. What I mean by this, is that if you have big debts that are old and charged off and the debt consolidation company starts contacting them and making arrangements then they will report recent activity and your credit score will go down further. It’s a better idea to leave charged off debts that are a year old or older alone until you have the full amount of the debt in hand, and then to negotiate for complete removal from your credit report.

The best debt consolidation companies will not make you miss payments on anything that you are current on or anything that you are 120 days or less behind on. This does damage to your credit report worst than almost anything else. They will keep those payments current and paid even if they do charge you a fee for the first couple of months so that there is no further damage to your credit report. They are supposed to bring your score up by fixing debt problems not bring your score down further so let them know if you see them doing something like that.