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Beware when dealing with credit repair offers

Georgia residents hear and see a lot of advertising targeted to consumers with credit problems. These companies offer to provide a range of goods and services, from copies of your credit report to relief from creditors. Some of them even offer to fix your credit report altogether. It's up to you to know what's legitimate when it comes to credit. There are plenty of offers out there that aren't!

One service that you hear about all the time is debt consolidation. Some companies that frequently advertise as credit assistance agencies are in truth debt consolidation lenders. Instead of helping you develop a payment plan to get out of debt, they encourage you to take out another loan, which will pay off all of your credit card balances. The sales pitch usually emphasizes that instead of making a lot of payments to a lot of creditors, you'll have only one monthly payment to make.

However, the sales pitch does not tell you that you'll usually pay a very high interest rate, not to mention miscellaneous fees, for this kind of loan. Nor does it tell you how much longer you'll stay in debt, usually at least five years.

It is possible to get a good deal on a consolidation loan, especially if you own your home. Most financial institutions offer home equity loans, in which you borrow against the equity you have in your house. The advantage to a home equity loan is that the interest is tax deductible, not the case with credit card debt.

However, the risk of borrowing against your home equity is that you're trading unsecured debt, such as credit card debt, for secured debt, which is subject to foreclosure or repossession. If your circumstances changed and you couldn't pay, you could lose your home.

In addition, many people do not have the discipline to stop using their credit cards once they're paid off. This means that in addition to having a debt consolidation loan balance to repay, regardless of what type of loan it is, without discipline, you could go out and run up your credit card balance all over again. If you truly want to get out of debt, it's probably best to leave debt consolidation loans alone. If borrowing is your problem, borrowing more isn't the solution!

As a Georgia resident, you are entitled by state law to receive two free copies of your credit report per year. You may request them yourself. You don't have to pay anyone to do it for you! There are three agencies that store credit information on consumers. You may print a free credit report from each of the three credit reporting agencies from the web: When requesting your credit report, be prepared to give personal information, such as your social security number.

Web posted on Thursday, April 20, 2006

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