Repair your Credit with the help of a Credit Counselor

Pros & Cons of Credit Counseling Services

What to look for in a Credit Counseling Service

Not to be confused with credit repair businesses, consumer credit counseling firms offer a few different bonafide services. Education and debt management analysis by trained Credit Counselor who can meet with you in the flesh, over the telephone, or online can help review your loans, set a budget, aid in developing plans to pay off all or part of what you owe.  They can also help in learning  new money money management techniques to keep you from getting overpowered by debt again. Another service they can offer is a debt administration plan, often called a DMP (Debt Management Plan). Basically, what they do is organize your finances so you can make one payment to them and then they take over the administration of splitting up your single payment and doling it out to your numerous unsecured lenders,  as per terms which have been negotiated with your lenders.
Naturally, for this they keep some of your money each month as a charge for their DMP services. When utilizing a DMP, you benefit from the credit counseling firm’s prearranged deals with creditors, in which they have negotiated some or all of the following terms with reference to the debt you owe :

  • A. ) Lower your credit |Master|Visa card interest rates
  • B). Eliminate late charges or other charges that have built up on your account
  • C ). “Re-age” your credit accounts by re-categorizing them as current rather than being late.

Some studies indicate that more debtors should turn to these services before their debt becomes an uncontrollable problem. Even after debt becomes an issue, this type of education and debt administration can be useful to those struggling struggling with their debt. Recently,  the US Bankruptcy Code required all those who file for bankruptcy relief to attend a briefing within 6 months before filing, that outlines credit counseling and provides help in performing a budget analysis and review. These services must be performed by a non-profit budget and credit counseling agency that’s accepted by the U. S. Trustee Program, a division of the Department of Justice. For a resource of approved credit counseling agencies, visit www.ust.cc.helpusdoj.gov. Better Business Bureau reports suggest that complaints against credit counseling agencies are rising. Some of the most common problems include not divulging charges to customers, not paying debt accounts on time, and enrolling|clients for DMPs without their approval. If the credit counseling service you are considering looking into flunks any of the following tests, you are advised avoid it.

  • A.) Flunk the 30-Minute Test :  Before offering you any recommendation, the credit advisor should spend at least half an hour speaking to you about your financial conditions. An effective session should last between 30 & 90 minutes. If, after less than half an hour, they are advising you to enroll in  their debt managemen plan, go  elsewhere.
  • B.) Push you into a DMP :  Not everybody who visits a credit counseling service needs to be enrolled in a DMP. The debt advisor should chat with you about whether a debt management plan is applicable for your situation. The reality is these companies only earn money if you sign on to a DMP. Also, many creditors give them a share of what you pay toward your debt. If a credit counseling company is pushing you into a DMP, you can presume that it might just care more about its own bottom line than yours.
  • C. ) Charge high fees :  Most services charge a set-up charge to initiate a DMP and a once per month charge to administer the program. Nevertheless, if a firm charges more than $75 as a set-up charge, and monthly fees that exceed $40, go some place else.

So here’s the Big Question : Is it advisable for a debtor to use a credit counseling service?

If you are having an issue dealing with your debt payments, particularly credit card debt, and this is resulting in late with or missing payments,  then you should probably call several credit counseling firms to seriously consider their services. And always, before choosing a credit counseling firm as a tool to repair your credit, check them out with the BBB and the Association of Independent Consumer Credit Counseling Agencies ( www.aiccca.org ).

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