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Should You Go to Credit Counseling?

Credit counseling has become a term that many people are familiar with, but they may not be sure of its meaning or the full implications of what can be accomplished when it’s utilized. Credit counseling often conjures up images of guidance to those who are under an excessive burden of debt, which can certainly be an accurate depiction. However, working with a credit counselor can also be beneficial for other reasons, such as helping consumers to improve their overall credit score, even if they’re not in a large amount of debt. Without understanding the bigger picture of what credit counseling is, consumers may be hesitant to look into it. By learning more about what this process entails, people can instead make a knowledgeable choice as to whether working with a counselor is right for their situation.

How To Keep From Being Scammed

Before getting into credit counseling, it’s important to be aware of the potential risks. These days, people have to be on their toes when it comes to avoiding scams, particularly when credit is involved. Because of all the advancements in technology, it’s become easy for dishonest companies to set up shop and rob unsuspecting people of their money, under the premise of helping them get out of debt. However, there are lots of valid credit counselors out there, and if a few simple steps are taken, consumers can be ensured that they’re dealing with someone legitimate. Most of these steps can be conducted by simply using tools available on the internet.
  • Accreditation: Consumers should look into a prospective credit counseling group by checking and validating that they hold NFCC (National Foundation for Credit Counseling) accreditation. 
  • The group should also be from a nonprofit agency.
  • In addition, legitimate counselors will hold Better Business Bureau (BBB) membership and maintain good standing.
They should also know the difference between nonprofit credit counseling and debt settlement companies that earn money. If a consumer chooses debt settlement, they should research the company thoroughly, and especially their standing with the BBB. This is because the debt settlement company will work with creditors on a person’s behalf, submitting the payments to the creditor. If the company’s not legit, it can be awhile before the consumer realizes those payments they’re making are not getting to the creditors, but have gone into a scam artist’s pocket instead. Another protective measure that can be taken is to personally stay in touch will all creditors, verifying that payments are being made promptly and regularly. Then if a problem arises, it will be noted immediately.

The Basics Of Credit Counseling

When consumers schedule a time to sit down with a credit counselor, that meeting can be a bit overwhelming to some, depending on the purpose for the meeting. However, although it may seem like a lot to deal with initially, consumers will leave the meeting with a good sense of where they stand financially. The goal is to gather all debt information and then determine what the actual income is. The two are then compared to see the current situation in order to determine the best direction. Even if there isn’t a problem with excessive debt, there is benefit to understanding that same picture.

Determining When Credit Counseling May Be The Right Choice

It stands to reason that when someone is having difficulty keeping up with all of their bills, especially credit card debt, that credit counseling is a wise option. If making the minimum payment each month is causing stress, and the person feels like they’re having a difficult time keeping their head above water, it’s definitely the right choice. 
In addition, those who aren’t overwhelmed by debt but want to learn how to increase their credit score can benefit also. By better understanding their personal financial picture, they can learn what steps will improve their score and tips to continue on the right path.

The Cost Of Credit Counseling

This is where consumers get a little hesitant, and for good reason. If they’re trying to get out of financial difficulties, how can they pay for assistance to do so? The good news is that generally speaking, the first meeting with a financial counselor doesn’t cost anything but a little time. The majority of consumers then go on to handle their own debt management, simply by putting into practice the suggestions and guidelines offered by the credit counselor. After an initial meeting, people will have an idea on how to approach negotiations with creditors or the basics of declaring bankruptcy.
For those who would be more comfortable with ongoing help, the cost of counseling is relatively low. Depending on the state of residence, a general amount is around fifty dollars a month. There may be unique costs incurred if the consumer is working in a specific area such as bankruptcy, but there are programs that may offer aid in those cases.

The Impact Of Credit Counseling On FICO Scores

When a consumer undertakes a debt management program through a nonprofit credit counseling agency, it can benefit their credit score. While in the program, while the payments are being made, the creditor will report the account as being paid as agreed, which boosts the scores. Once the debt is paid off fully and the program is finished, the credit reports reflect a good standing with creditors, thus boosting the numbers overall. However, consumers should be aware that this is not the same as settling a debt, which usually reflects negatively on their credit report. 
Overall, credit counseling through a reputable company can be an excellent choice for consumers. This is true whether they’re in excessive debt and need a hand to get out with minimal damage to their credit, or they just want some professional guidance and tips in handling their budget and finances.
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Alice Bryant's picture

Alice Bryant is the Editor of Creditnet and a personal finance expert with over a decade of experience writing about credit cards, credit scores, debt repair, and more.

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