What can a credit debt counseling program do for you? Amid the oft misleading ads, hype and outright scams, it is important for you to know the truth about credit counseling before diving in.
A credit counseling program may be just the thing you need to begin your journey to being debt-free. And a journey it is. You see, there is no easy solution or quick fix to debt problems. Anyone who tells you otherwise may not have your best interests in mind.
What a good credit counseling agency does is look at your case from a professional perspective and offer you options for resolving your debt issues.
You are expected to provide all details about your finances including credit, debt and income, as well as your short-term and long-term personal financial goals. This is in order to provide you with the best possible option(s) to suit your situation and lifestyle.
The first thing you need to do is find a reputable credit counseling service. This can be challenging as scam companies are galore. But if you know what to look for you can narrow down your search and make the task much easier.
It is advisable to go for a nonprofit agency. But note also that some so-called nonprofit agencies have been caught in crooked practices, so you should not stop here.
Check with the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) as they have a list of reputable nonprofit agencies you can choose from.
Here are some red flags to look out for when shopping for a credit debt counseling program;
1. Upfront fees. Most legitimate credit counseling agencies will not ask for a fee before talking to you.
2. Claims to make you debt free today. It takes time, even with the best help in the world.
3. Erase, or cut your debts by 50% or more. A reputable debt counseling service will expect you to meet your obligations as this is the honorable thing to do. If an agency promises to erase or cut your debts by a huge percentage, this is likely to be a debt settlement plan which can potentially cause you other problems including tax problems.
4. Charges a high monthly fee based on your total debt. If you enroll in a continuous program such as debt consolidation and/or educational program, you can expect a monthly fee. But this should be a flat rate that you should know upfront.
5. If the agency's employees work on commission, run!
It should also be pointed out that a credit debt counseling program can impact on your ability to obtain new credit. Typically, it will show on your credit report that you are in counseling. Some creditors just will not want work to with you if you are in counseling.
Also, though your counselor will negotiate for lower interest rates on your behalf, some rates could actually go up. If you choose to take the debt consolidation route, you will be required to close some accounts which will like negatively affect your credit score.
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