Is Credit Counseling the Solution For Your Financial Problems?
Consumer credit counseling agencies help overextended credit consumers manage high interest rate unsecured debt. It is their professional goal to assist you to regain financial stability in your daily life. Professional certified credit counselors assess your bills, finances, and credit. Then they assist you to identify how to get out of financial debt in your current situation.
The first step that a credit counseling agency will take is to contact all your creditors. This is done to determine how much of your debt is actually yours and how much is being held by your creditors as inventory. This inventory may also include other forms of debt such as store cards or student loans. Your creditors may also have other records such as tax forms, bankruptcies, foreclosures, repossessions, and judgments.
With this information the certified credit counselor will then work with you and your creditors to develop an individualized debt management plan. This is a written outline of your financial situation. Included in this document are all your monthly payments as well as all creditors who are reporting to your credit report. This document is your road map to financial recovery.
After developing your road map to the counseling service agency will contact each of your creditors. They will negotiate with each one on your behalf, to reduce the amount of interest that is being charged. These negotiations may result in a reduction in the principal amount of the outstanding debt or it may result in extension of the term of the debt contract. In most cases the credit counseling agency will settle the debts for less than the full amount. These agencies are not responsible for collection activity that has been reported against you.
Once all your accounts have been settled the certified credit counselor will contact your creditors and repayment plans will be established. A repayment plan will be put into place that will be affordable for you and help to improve your credit score. Credit counseling agencies do not employ debt collectors. When you first contact an agency, they will ask you about how much debt you currently have and the length of time that you have had credit issues. Your counselor will then work with you to come up with a monthly plan. This payment plan should include a reasonable amount for making payments to your creditors each month.
An unsecured debt that is handled through credit counseling will affect your credit score negatively. A debt management plan can be used to alleviate the pressure from both secured and unsecured debt. A reputable my agency will be able to offer you a reasonable monthly payment plan and will work to get your score back on track.
There are many reputable credit counseling agencies in each state that provide similar services. In order to receive one of these services, you will need to fill out an application. A national foundation will review your application and if they feel it is a good match for your needs they will provide you with a quote. The quotes will be based on your credit history as well as the report that the agency provides you with. Each agency may vary slightly in what they charge, but they will all be very similar. You will get your money each month and your score will be lowered.
Most credit counselors will not require you to make large payments right away. The majority of them will suggest that you make payments until you have enough in savings so that you can start making purchases. You should expect to have your first payments deducted from your checking account. You should also expect a monthly conversation where you will discuss your finances with your credit counselor. You should be very happy that you turned over your finances to a third party that will give you a second chance to handle your finances.