Credit Counseling
Credit Counseling Agencies and Credit Counselors can stop the collection calls, help avoid foreclosure and bankruptcy, lower your monthly payments, lower your interest rates and reduce late fees, charges and penalties. Credit Counseling Agencies CANNOT repair your credit instantly or settle your debts for pennies on the dollar.
Credit counseling agencies are available for individuals, non-and for profit corporations, churches and schools. A good credit counseling agency will contact your creditors to negotiate the terms of your debt, create affordable debt repayment plans and provide assistance getting out of debt.
Consumer debt has grown considerably over the last ten years, likewise there has been a large amount of growth in the Consumer Credit Counseling industry. Additionally, bankruptcy law changes now require those filing for bankruptcy relief to obtain pre-bankruptcy credit counseling from an approved credit counseling agency. The mandated has created a explosion of credit counselors and debt relief agencies.
Selecting an Approved Credit Counseling Agency
Choosing a good credit counseling agency will help put you on the fast tract to a life with good credit. Selecting a bad credit counseling agency may be expensive with large hidden fees, have a negative effect on your credit report and may not improve the terms of your debt.
The US Department of Justice offers a list of “approved” credit counseling agencies that meet minimum criteria to offer credit counseling and debt management plans. Although these credit counseling agencies have been evaluated as being able to provide credit counseling, you should always thoroughly research and compare credit counseling agencies before providing any sensitive personal financial information.
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A Look at Credit Counseling Fees
Credit counseling agencies fees vary for financial education courses and debt management services. Many credit counseling agencies offer free budgeting and debt courses. Bankruptcy pre-discharge education is now a requirement to exit bankruptcy and is a competitive service with certificates of completion beginning at $25.
Credit counseling agencies typically paid both by their clients and the creditors. Credit counseling clients generally pay a fee to have a debt repayment plan setup and in many cased a monthly maintenance fee.
Credit counseling services may charge the creditors of debt repayment plan clients a percentage fee which is included in the debt repayment plans. This fee charged to creditors ranges from 0 to 15% and is called a “fair share” fee. Credit counseling agencies justify this charge to client creditors as the agency is managing the creditors debt and providing on-time monthly payments to the creditors.
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Debt Management Plans
Credit counseling agencies provide debt management plans or debt repayment plans to help consumers settle and repay debts. For consumers in over their heads and in a credit crisis, a good debt management plan managed by a credit counseling service will help lower your monthly payments, stop the collection calls, lower your interest rates, help avoid foreclosure and bankruptcy, reduce late fees, charges and penalties.
The disadvantages of debt management or debt repayment plans is the possibility of negative impacts on your credit report, variable fees and interest rates assessed by the credit counseling agency, secured debts are generally not consolidated and the risk of conducting business with a shady credit counseling agency that in a State with little regulatory oversight.
Learn how long it takes to complete a debt management plant with a credit counseling agency. Explore fees and rates for debt management plans and more.
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Making Sure Your Creditors are Being Paid
Just because you enter into a debt repayment plan with a credit counseling agency does not mean that every creditor will accept the terms provided by the credit counseling agency. You may not know for a number of months after beginning a debt repayment plan if the credit counseling agency’s payments are being accepted.
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Credit Counseling and Your Credit Score
Using a credit counseling service effectively will help establishing a history of on-time payments. Many credit counseling services use a debt management plan or debt repayment plan where you make one payment to the credit counseling agency and they pay your individual creditors.
Credit counseling will not erase your past negative credit history or fix your credit score or credit report. If you have disagreements about items on your credit report, you will need to contact the creditor in writing and dispute those items.
In addition to making on-time payments to your credit counseling agency, paying off the debt will help increase your credit score.
