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What Is Credit Counseling?
Credit counseling is an effective way to get out from under a mountain of debt. There are two types of debt counseling firms, one is a profit making company and the other is a not for profit organization. Both offer the same services, which are advice to creditors and options to resolve pressing credit situations. The options that they propose may range from making informal arrangements with creditors to debt consolidation to recommendations of declaring bankruptcy. All of these suggestions will be based on the individual case and the depth of the debt problems.
The major differences between for profit and not for profit debt counseling services are in the fees they charge, the range of services they provide in-house, and the experience of their staff. Generally speaking not for profit organizations are cheaper but for profit companies tend to have more qualified staff. The end product will likely be very close regardless of which type of organization you choose. The important thing in debt counseling is to be honest and provide all of the necessary information at the very beginning of the process. There are no secrets in the credit industry and if you have changed addresses or even names your credit history is likely to follow you. By being upfront with your debt counselor they can more quickly bring you closer to a resolution of your credit and debt problems.
After your initial interview with your credit counselor they will prepare a report for you that outlines your current credit rating, which is your ability to borrow and under what conditions and interest rates, and starts the process of laying out options for you to consider. If it is still possible for you to get additional credit, or negotiate a debt consolidation loan from a bank or other lending institution, then they will help you arrange that. More likely than not the recommendation will be bankruptcy protection or formal debt consolidation. If you have absolutely no ability to repay the monies owed in either the short term or over a long period of time then personal bankruptcy may be your only option. In that case the debt counselor will help you get organized for that process.
But most people want to repay their debts and just need a little more time to do that. Debt consolidation can help make that happen and it involves a negotiation process with your creditors so that they will accept something less than full payment in order to relieve you of your debt to them. Your debt counselor will look after all of that for you and after a period of months of years you will once again enjoy a positive credit rating.
New Credit File
Bring all of your financial materials with you including the latest statements from your creditors and a copy of your most recent pay or income stub.
Only borrow what you can afford to repay in a reasonable period of time. Credit counseling is an effective way to get out from under a mountain of debt. So if you are still current with your accounts and afraid of falling behind, immediately see a counselor to find a suitable way out and protect your credit.
Finally, never use one credit card to make a payment on another credit card.
Another major area of contention has arisen about the validity and effectiveness of the whole credit counseling process on the credit rating of the individual who goes through this process. Work your way up the list, assigning debt in order for lowest to highest. Remember, once your creditor takes you to court and wins a judgment, it will be reported as a public record in your credit file and stay there for 7 to 10 years. By working with debt negotiation services youll soon find yourself out of debt and on your way to a healthy financial situation. If you have not seen your credit report and have been denied by a creditor, you should get a copy of your credit report and analyze why you were denied. Building credit history, and understanding the logistics behind it, is crucial to getting out of debt and staying out of debt.
Once they have determined the extent of your debt problems and calculated your ability to repay then the credit counseling agency will help you develop a debt consolidation plan.
This will establish that you are prompt at paying your bills and that you more than exceed the minimum monthly, required payment. Do you take too much time to pay back your debt? It is pretty difficult to anticipate how long it will take to get you out of debt. |
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