Drowning in debt

What's in your wallet may be credit card debt multiplying like mold.

If so, take heart. You're not alone. But digging out will be tough and take a real commitment plus serious concern about credit reduction flim-flams, say local folks in the know.

Be very careful if you call credit reduction companies who promise they can reduce your balances by tomorrow. Even worse, be extra careful if they solicit you. Be sure they're accredited and get it in writing, said Vicki Hughes, director of Consumer Credit Counseling Service (CCCS) based in Lima. The CCCS has satellite offices in St. Marys, Van Wert, Bellefontaine and Kenton, plus a branch office in Findlay.

Not all credit counseling agencies are created equal. Beware of those that offer little or no actual counseling but make big promises and real quick action.

"Some don't really make distributions of the (repayment) money you send them and then you have an even bigger problem with your creditors. Find out all about who you're dealing with before you commit. Check with the Better Business Bureau, the attorney general's office. Even check them out with your own bank," advised Neil Winget, director of the Better Business Bureau in Lima.

He said there are "plenty of reputable organizations who can indeed help you without costing an arm and a leg."

Locally, the biggest cause of exorbitant debt is credit cards followed closely by medical bills, according to Hughes. Nationally, medical bills are number one with loss of job running second.

"The average credit card debt we see in our office is about $50,000 ... Average number of credit cards used per individual/family is 8 to 10," she said. "Sometimes there are so many accounts the client doesn't even know who he owes or how much. And, sometimes clients have more than one credit card (account) with the same bank."

Among the initial steps Hughes suggests is to request your own credit report. Her agency uses four main credit reporting firms: Trans Union at 800-916-8800; Credit Bureau of Toledo at 800-632-1765; Equifax at 800-685-1111; and Experian at 888-397-3942.

"You absolutely need to know where you are with your credit and have a complete list of your open accounts," said Hughes, who added when she first started in this business 21 years ago there were only a couple credit cards available - Visa and MasterCard.

Where do credit card debt problems begin? Winget and Hughes agree that it's with the fact that getting credit is so easy. "Plus the fact that people don't read the credit application thoroughly and don't really understand all they're reading. In the little print is often the notice that the interest is going to go from 15 to 30 percent."

Hughes' agency is a member of the National Foundation for Credit Counseling, founded in 1951. Last year member agencies, who are all non-profit and community based, provided counseling to more than one million households.

"Our funding comes from tax deductible contributions from creditors, performance premiums from creditors, United Way and nominal maintenance fees from clients," she said.

While clients can always call creditors to negotiate payment schedules and so forth, this is an area where CCCS has been very successful in negotiating lower interest rates, bringing accounts current, stopping over-limit and late charges, which can add $80-plus a month, among other service fees.

"Creditors know we have done a thorough check of the client's ability to repay. We've verified payroll information and our paperwork is very detailed. We even get down to listing veterinarian bills for pets," she said.

Changing your credit status requires changing your lifestyle. Hughes pointed out that once credit is eliminated a large chunk of spendable income is gone. "You can't just run out and purchase what you want anymore. It's tough. Sometimes people just give up.

"It takes discipline and its takes a long time. A $50,000 debt typically averages five years to repay," she said, adding it takes 7 to 10 days getting the client set up to travel down that five-year road.