Will Credit Counseling Services Help Me?

Here are some indications that you need help:

• You are not able to make the minimum payments each month on your credit cards. 
• You are consistently late in paying one or more of your regular bills.
  
• You are getting calls from credit card companies and/or collection agencies.
  
  

Who are Credit Counselors?

Consumer credit counseling can be very beneficial but does have some negative effects on your credit report (more on this later in the page). First of all if you are considering bankruptcy you should look into consumer credit counseling. Not only can it reduce your payments, interest rates and help you pay off credit cards faster, it is also now required before you file for bankruptcy. Professional counseling services provide consumers with education and options specific to your needs.

How it works:

Consumer Credit Counselors will work for you to lower your interest rates, consolidate payments and set up a plan to be debt free in two to three years depending on your situation.

Some consumer credit counseling firms will work over the phone but it is best if you take the time to visit one of their offices. You will need to bring a copy of all of your bills and statements for credit cards, utilities (phone, electrical, cable, internet gas, oil, etc.) child support, installment loans (mortgage, car, etc.) and your income document (pay stub, W-2, 1099, alimony). This will enable a credit counselor to assess your debt to income ratio and work out a payment plan based on your particular situation. In some cases consumer credit counselors can negotiate reduced interest rates with your credit card companies and establish a payment plan with your creditors.

Your consumer credit counselor will set up an agreement or "Debit Management Plan" (DMP) for each of your creditors. You will start begin making payments directly to the consumer credit counseling agency. The agency will then disburse payments to each of your credit card companies. Typically your credit card companies will not let you use your credit card until the agreement is completed and the credit card is paid in full. In addition, most many credit card companies will NOT reduce your limit as you pay off the cards. This will help your credit score will go up by reducing credit utilization.

Fees

Many consumer credit counseling agencies are non-profit. This does not mean their services are free. Most will charge a minimal fee, $0-$50 for their services and consultation and in some cases a monthly maintenance fee that is usually under $25. You should never have to pay a fee for your initial visit.

Your repayment plan should not be stretched out over many years. A typical plan will take between 2 and 4 years. If the plan will take more than 5 years you should consider options for bankruptcy

Negative effects on your credit report

Some credit card companies may document in their reports to the credit bureaus that they have negotiated a reduced payment agreement with a consumer credit counseling agency. While this will not affect your credit score directly your prior late payments will not be removed. When you go to apply for credit or a loan, lenders may see this statement. Due to the economy changes, this is not as damaging as it has been in the past. More people trying to work with creditors instead of filing for bankruptcy and this is seen as a positive action.

 

 

Here is a list of approved Credit Counseling Agencies

Here are the details!

If you are looking for a more Do It Yourself program but need a little help getting started you may be interested in DebtGoal.

Unlike debt settlement or credit counseling, DebtGoal is designed for borrowers who have the means to pay off debt, but need help creating and sticking to a plan that will get them out of debt most effectively. DebtGoal puts control in the hands of borrowers, letting them manage all types of debt and choosing a payment plan that works for them. DebtGoal is dramatically less expensive than alternative solutions and improves rather than destroys the borrower’s credit.

Here are the details!