What is Credit Counseling All About?

Many people who are suffering from extreme financial troubles due to debt have successfully made use of credit counseling services. While it is often spoken of in the same breath with debt negotiation it is really quite different. If you work with a credit counseling service you will have your own personal credit counselor who will help you to get out from beneath your debt. They can help get your debts consolidated so that it is easier for you to make your monthly payments. You will only be paying one lump sum each month and it should be smaller than the sum of the payments you were making previously.

If you are sick and tired of bill collectors calling you as well as terrified of the collection agency letters you keep receiving, then credit counseling just might be for you.

There is a right way and a wrong way to deal with credit counselors though. First of all, you need to be able to tell the good from the bad. Not all of these services are reputable. Millions of people have been taken in by credit repair scams, don't you let yourself become one of these victims.
Any offer that tries to sell you a quick fix should be discarded immediately.

There is no overnight fix for bad credit. It is going to take some time before you are back on top. You want to look for reliable companies that have been accredited by Consumer Credit Counseling Services.
Once you have found a good service you will have to make an appointment so that you can meet with them. The counselor will need documentation of all of your debts, you need to show the counselor everything because that is the only way they will be able to work out a solid repayment plan for you.

Now it is up to the credit counselor. They will then let your creditors know what is what and explain to them that you are having problems and they are there to fix it. They will work with the lenders to come up with a plan that you can live with, one that comes with smaller payments and lower interest rates.

If you want, most credit counseling services will allow you to send them a lump sum payment that they will make sure gets to the creditors each month. This is what is known as a debt management system. While this is a handy tool, these services have been known to be late occasionally with the payments and this is something that you want to avoid. Late or missed payments will do even more damage to your credit report. What you need to do to avoid this problem is really check out the service and find out what dates they plan on mailing out any payments.

A credit counseling service that is running a scam will ask you for huge fees up front before they do anything at all whereas a reputable company will only charge you about 14 bucks a month. That is one of the best ways to tell the true services from the greedy scammers.
While dealing with credit counselors may not be perfect, if you are in serious trouble due to your debt and you just can't deal with it anymore, it might just save your life.

Be Careful When Choosing A Credit Counselor

When you find yourself in a bad credit situation it is easy to find hope in credit counseling agencies. You feel safe when someone says that they are a "non-profit organization." But often, those that are offering help are only helping themselves.

Federal and state regulators are warning consumers that some credit counseling agencies are not what they seem. They may actually be using a non-profit status to avoid consumer protection laws. This gives them the ability to advantage of you, the trusting consumer.

What makes the agency non-profit? All they have to do is provide free education and counseling services. But many agencies are using these as a way to hustle clients into debt-management plans, which pay off big time.

With most debt-management plans, the client pays the agency a certain amount of money each month. The agency then pays the client's bills. The agency negotiates lower interest rates and the waiving of fees with the client's credit cards and loan companies. The credit card companies will usually give the agency a kickback, a percentage of the amount repaid.

Many experts say that clients are often pressured into the plans, even if they don't need them. Some agencies don't pay the bills on time, and you are the one who suffers.Even the IRS has stiffened its review of agencies seeking non-profit status.

There are legitimate credit counseling agencies out there that can help you with your financial problems. You just have to shop around and do your homework when choosing an agency.
Talk and visit several agencies before selecting one. Don't let the non-profit label fool you into thinking that a certain agency is better than the others. Non-profit status doesn't differentiate the good from the bad, you must do that yourself.

Watch out for agencies that want "voluntary" contributions and high monthly service charges. If you are having financial problems, chances are that you can't afford to pay high fees. Before you sign up for a debt management plan, request a written statement of all agency fees.

If an agency says that they can get you out of debt quickly or slash all of your interest rates, don't believe it. First, getting out of debt takes time. You are simply looking for a plan that will get you there a little faster - but it still takes time.

Secondly, interest rates are determined by your credit card companies, not the agency. Many creditors won't lower your rates. Some will. The agency has no idea of knowing what the future holds.

Check with your creditors to make sure that they are willing to work with the agency you choose. Once you have started a payment plan, make sure that your creditors are receiving their payments on time. If they don't, it's your problem.

Ask around for a reputable agency. Check with the Better Business Bureau and your state's attorney generals office to see if there are any complaints on file. Ask the agency if they are a member of the Association of Independent Credit Counseling Agencies or the National Foundation for Credit Counseling - two well-known groups that have standards and fee limitations.