What You Must Know About Credit Counseling Services

Many Americans are facing mountains of debt like never before.  The current state of our economy has lead to massive foreclosures and numerous credit card defaults.  People who find themselves facing this type of serious financial difficulty should consider seeking professional advice. Credit counseling agencies specialize in helping people who are in over their heads with debt and need help getting  back into financial stability.

Ask yourself these questions to see if you should consider credit counseling:

Have you been struggling financially for several months or years?

Are you so behind on bills that you find yourself unable to pay all your bills each month?

Do you avoid answering the phone because you’re getting phone calls from bill collectors on a regular basis?

Do you have bad credit that has resulted in being denied for credit several times?

If you answered yes to any of the questions above, you may  have a long term financial problem that could benefit from some professional guidance. There are so many credit counseling services available today that it might seem a bit overwhelming trying to find one that’s right for you.

Here are some things you must demand from a credit counseling service:

All of the services the company claims they will provide you should be provided to you in writing.

Your fee should be a percentage of the amount of money they save you when negotiating with your creditors – not a flat rate.

You should be advised of your rights as a consumer and provided detailed information on what you can expect from them.

Their debt re-payment plan should be tailored to your personal needs and your situation – not a “cookie cutter” approach that can be used by almost anyone.

Furthermore, here is some considerations provided by the Better Business Bureau:

Check that the organization will help you manage your finances better through counseling and education.

Carefully read through any written agreement that a credit counseling organization offers. It should describe in detail the services to be performed; the payment terms for these services, including their total cost; how long it will take to achieve results; any guarantees offered; and the organization’s business name and address.

Beware of high fees or required “voluntary contributions” that, with high monthly service charges, may add to your debt and defeat your efforts to pay your bills. It is illegal to represent that negative information, such as bankruptcy, can be removed from your credit report. Promises to “help you get out of debt easily” are a red flag.

Make sure that your creditors are willing to work with the agency you choose. If they are, follow up with those creditors regularly to make sure your debt is being paid off.

Check with state agencies and your local BBB to find out about a specific credit counseling organization’s record.

The advice from the BBB about ensuring that a credit counseling agency is actually paying your debts, as agreed, is an important one. There have been reports that some less than perfect credit counseling agencies sometimes pay their clients bills late. These late payments are then reported to the credit bureaus, which ends up hurting the clients credit score, potentially long term. This is not the norm, but it has been known to happen, so it’s important to do some research on your credit counseling agency to make sure you use one that is professional, ethical, and provides you an honorable service.

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