Credit Counseling Services

If you find yourself getting deeper into debt, you may consider the services of a credit counselor.  Credit counseling services assist consumers in getting out of debt, and it is generally considered a better alternative than declaring bankrupcy.

There are many credit counseling services available.  Generally, there is an initial session in which all financial information is evaluated, including credit cards, mortgage, educational, medical and other debt, along with income resources.  Credit counselors work for you by negotiating with your creditors to arrange special considerations, reduction of monthly payments, reduction of interest rates, waiving of accumulated late fees or other penalties, and re-aging of account (bringing them to "current" status). 

You begin repaying your debt to the credit counseling agency and they make the payments to your creditors.  In fact, you can reduce your monthly payments significantly, enabling you to eventually become debt free.  This may take years, depending on your level of debt.  An integral part of this service is to create a budget for your spending during the period of paying off your existing debt.  Your credit cards are generally suspended, and the credit counseling agency will expect that you will not incur any further debt.  This is a temporary, but necessary sacrifice to get out of financial difficulties, but you need to understand that this is part of the solution.

You will not be eligible for any credit during the time your finances are in the hands of a credit counseling service. 

There is always a cost -- even so-called "non-profit" credit counseling agencies need to produce income to stay in business.  Be sure that you find out the terms and conditions of any arrangement prior to signing any contracts.  Find out how the agency makes their money.  It could be that a flat fee is better than a percentage of your payments over the long-term.

Look for professional designations to insure a professional and reliable partner.  Agencies should be members of the Better Business Bureau, National Foundation for Credit Counseling (NFCC), and accredited by the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

For more information, the Federal Trade Commission publishes a guide entitled, "Fiscal fitness: Choosing a Credit Counselor".  www.ftc.gov/bcp/conline/pubs/credit/fiscal.shtm

Then, visit the website for the National Foundation for Credit Counseling to obtain more information and member agencies in your area.  http://www.nfcc.org/