Credit Counseling

People who have to deal with debt relief situations are usually in need of credit counseling experts and agencies. Financial guidance and financial education are offered by the Credit counseling advisors. In addition, some counseling agencies offer debt repair plans services. These services are essential with the purpose of escaping or avoiding a financial crisis.

Credit counseling covers issues such as credit and budget advice, credit card counseling, family credit counseling, repayment plans, reverse mortgage counseling, and financial education. Depending on where you seek credit counseling, some of the above, all of the above, or even more options might be available to you.

Credit counseling can come free of charge. This includes guidance and financial education as well as specific advice about concrete financial issues. If you have the option to take advantage of free-of-charge credit counseling, you should definitely do so. All you have to do is discuss your financial situation and then receive advice and guidelines from an expert on the subject. Credit counseling can usually be sought online, over the telephone, or in a one-on-one meeting. Out of these three, person-to-person communication is preferable.

The goal of consumer credit counseling service is to educate the debtors of different consolidation ways. Of which the secured debt credit is the one with which you can avoid unnecessary additional clerical costs and also prevent legal actions against you. In short credit counseling is designed for persons who are neck deep in debt.

Some Helpful Steps

  • List out all community based and nonprofit credit counseling services.
  • Check out their accreditations and business histories through their websites and testimonials.
  • Talk to them before signing any documents.
  • Don't leave anything to ambiguity; get theirs and your obligations in writing.
  • Take help from The National Foundation for Credit Counseling for researching about some credit counseling organization.

Shopping Around for a Credit Counseling Program

Such credit counseling programs ought to be able to send you free information about their program, without having to know about your financial situation’s personal information. You should not work with a credit counseling program that will not provide this for you. Getting free information will enable you to select from a variety of programs to find the one that's best for you. You can also do environmental research on credit counseling programs by seeing what your local consumer protection agency, attorney general, or Better Business Bureau has to say about them. If consumers have registered complaints about the credit counseling program, they might not be the best to use. Cautiously think about any complaints you find, keeping in mind that some people are unreasonable or vindictive and not every complaint necessarily has validity. If the agency has a complaint, be sure to read their explanation of events to see what they claim occurred. Then decide if it makes sense to you to work with that company.

What is Involved in the Credit Counseling Process?

When a consumer goes to credit counseling, they will work together to determine a monthly payment based on the amount of debt that the consumer has and the creditors that are owed. Consumers sign up with the credit counseling agency and then send the monthly payments to the agency. The agency then negotiates lower interest rates when and where they can, and make the payments to the creditors. However, it is entirely possible that some creditors will not give lower rates or participate in the programs.

What is the Cost of Credit Counseling?

Every situation of the state, company, and individual will affect the credit counseling services cost. Some states have specific regulations about fees and charges, and if you have a lot of debt or creditors you will likely pay more than most people. Set up fees average around $50 while monthly fees for being a member are around $30-$40. These fees are often lower simply because your creditors will give part of your payments back to the counseling agency. If a company tries to take your money right away, you might want to avoid them because they're probably not the best choice in companies to work with.

What about Non-profit Companies?

There are some credit counseling services that are not-for-profit, but not all of them. There are many companies that operated in the past as non-profit that have lost their tax exempt status because they were found to be partially profitable. On the other hand, unless you are in a financial situation where payment is not an option, most non-profit companies will still charge you fees for their services.

Does this Mean that Non-profit Services are Regulated by the Government?

No, they just have tax issues to consider for their non-profit operations. Many of the non-profits that exist are neutral and will attempt to be impartial when assessing your needs. Some companies, for profit or not, will still have a vested interest in signing up consumers regardless of their situation simply for the fees that they will earn.

What is the Obstacle to Credit Counseling, and Does it Affect My Credit?

Positive and Negative. If your bills are up to date, you'll have a negative effect on your credit for using the services, but if you are behind, using counseling to catch up payments look good in most cases. Keep in mind that debt settlement and payment plans don't actually impact your credit score, but they will affect your report when lenders see reported on there that you worked with credit counseling and/or debt settlement. Credit counseling also doesn't lower monthly payments enough for some people, which is what they need in the first place. Since no debt is being settled, you have to depend on the counseling company to make your disbursements on time, periodically, and if they don't your interest rate might go right back up. The final downside to credit counseling is that not all creditors participate. This is something that you don't find out until the agency tries to make payments to them, and then the account will be considered past due because they didn't get the payments from the counseling service because they don't participate.

How Can a Credit Counselor Help?

One of the main goals of a credit counselor is to negotiate better terms with your creditors. A credit counselor will also try to enroll a consumer in a debt repayment plan, which can be used as a tool as you approach creditors to get better terms on your accounts.

Why Credit Counseling?

You really should do your due diligence before you make any major financial decision, same goes for credit counseling. You should probably seek the guidance of a professional if you can answer yes to one or more of the following questions:

  • Is your debt situation starting to affect your relationships?
  • Has any lender ever denied you of credit?
  • Are you getting harassing phone calls from creditors that are getting out of control?
  • You are finding it hard to cope with your debt?

If you have decided to get hold of credit counseling, keep in mind that you have to also do your due diligence on the organization and make sure that they have their scruples intact. It would probably be in your best interest to seek out a non-profit credit counseling agency, but even the non-profits can be a scam so make sure that they have the membership of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

It's also probably best if you ask for references. Any organization that you're looking to do business with should provide at least one reference, if they don't provide any references immediately or dodge the questions in any which way that should be a definite red flag. You should also check out the Better Business Bureau, or your State Attorney General's office for any cases or complaints filed against the organization in question.

Another thing worth checking is always asking about their fees and make sure that they are forthright in their dealings as far as their fees are concerned. Most legitimate credit counseling agencies don't ask for an upfront fee, but most have a suggested monthly donation when you are enrolled in a program.

Do not pay for anything up front until the terms of the agreement are clear and concise, and there is a clear expectation of what the credit counseling agency is going to execute.

Who Needs a Credit Counselor?

If you feel overwhelmed by debt or have trouble making your monthly payments on credit cards, store accounts, mortgages, or other forms of debt, you could probably benefit from the services of a credit counselor. It is possible to get out of debt on your own, but some expert guidance from a concerned, accredited organization can make the process quicker, easier, and far less painful.

Crediting counseling is a good way to demonstrate to your creditors or to a collection agency that you are actively working on repaying what you owe. A credit counselor will also endow with the most effective guidance to rid all your debt, curtail interest payments, and build up smarter spending and saving habits.