Who can you trust to help repair credit?

Logos for credit card companies American Express and Visa

TEXT OF INTERVIEW

Steve Chiotakis: We heard this week that American Express is offering some cardholders 300 bucks if they pay off their balances and close their accounts. In this economic fallout, defaults are up; cardholders are having a tough time paying their bills.

So let's bring in columnist David Lazarus from the Los Angeles Times. David, AMEX and all the others -- Visa, Mastercard, Discover -- they give the consumer buying power. Yeah, the card companies charge these fees and increase interest rates, but it is their money. Why are they the bad guys in all of this?

David Lazarus: OK, look -- credit card companies, let's give them the benefit of the doubt and say they're offering these loans to consumers and they're charging a fair rate and blah, blah, blah. We all know better. Every one of us has had an experience of having a late fee attach for some miggling little charge or seeing their rates going up for no reason. Citigroup just sent out letters to millions of people saying rates could go up to as much as 30 percent if you miss a single payment. Chase has just announced that they're tacking a monthly fee on all cards that have been carrying a balance for quite some time. Why are they doing that? Because they bet wrong on the housing market primarily, and they're passing along the cost to customers.

Chiotakis: David, there are a whole host of companies that are out to help people with their credit. One just started this month called Helpwithmycredit.org. You're skeptical about some of these companies. Why is that?

Lazarus: Well, Helpwithmycredit.org, let's give it the benefit of the doubt and say that it's a very well-intended site, and anything that teaches people how to be better users of plastic, that's a good thing. That said, this effort from the credit card companies to try to show themselves to be friends of the consumers, well, it rings a little bit hollow. It's sort of like Philip Morris having a Web site saying they care about kids smoking cigarettes, or Chevron having a Web site saying they care about the environment, which both these companies do. But their priorities are a little different, let's face it. If the credit card companies really care about helping people not default, stop jacking up people's interest rates!

Chiotakis: Why is there such a proliferation of these credit card assistant programs? It seems like this is big business now.

Lazarus: Well, it's big business because we have record levels of consumer debt nearing one trillion dollars. That's big money, and there's a lot of companies that recognize that. Moreover, we're in a climate where your FICO score, your credit score, can ripple out through the entire economic spectrum of your financial dealings, and a lot of people are aware of that, although they don't know what to do about it. Hence you get all of these firms that step up and say, don't worry your pretty head, we can help you with that. Now sometimes, like reputable credit counselors, that's a good thing. What they'll do is work with you to try to restructure your debt, they'll negotiate with some of the creditors and see if they can perhaps bring down the principle that's owed and work out a monthly schedule where you can pay your bills. That's a good thing. Then there's so-called credit repair services, or debt settlement services, which say that if you give us a big fee upfront, we're going to protect you from all those nasty creditors, and in fact improve your credit score. By and large, those guys tend to be rip-offs and I would advise people to steer clear.

Chiotakis: David Lazarus, columnist with The Los Angeles Times. David, thank you.

Lazarus: Thank you.

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