It can be difficult to get out of a financial slump, pay off debt and build up your credit.
It can be particularly stressful if you are living paycheck-to-paycheck, accumulating debt, and your bills seem to keep on piling up.
You are not alone. It can be frustrating, and even worrisome. In a recent survey by the National Foundation for Credit Counseling 60% of consumers reported having credit card debt within the past 12 months. 37% carried it forward month after month.
What can you do when you are in financial difficulty?
It is possible to do this on your own. However, knowing where to begin can be difficult. Consumer credit counseling services are one place you can go for help.
Table of Contents
What are Consumer Credit Counseling Services (CCCS)?
Consumer Credit Counseling: Why you might need it
What is the cost of consumer credit counseling services?
How does consumer credit counseling work?
How do you choose a consumer credit counseling service?
Does Credit Counseling Damage Your Credit Score?
Why Should I use a credit counseling service?
What are Consumer Credit Counseling Services (CCCS)?
Consumer Credit Counseling Services are non-profit organizations that receive grants to fund their services. They exist to help you find realistic solutions to your financial issues. You can find a variety of programs that will help you with debt, credit, and budgeting.
Consumer Credit Counseling: Why you might need it
Your debt can sometimes spiral out of your control. Some people take out loans in order to pay for other debts. Before you know it, they don’t know what is owed or who owes the money.
The next thing you know your credit score is ruined and debt collectors are calling you to collect thousands of dollars. It can ruin your credit score, and you will be plagued by it for many years.
Declaring bankruptcy is an option but it shouldn’t be the first thing you do. If you need assistance, contact a consumer counselor. If you’ve declared bankruptcy, consumer credit counseling services can guide you through the process.
Consumer Credit Counselling Services may be right for you if
You’re behind on your monthly payments (or you don’t understand how much to pay).
You have been contacted by debt collection agencies
You’re not sure which debts to pay first
Your interest rates are excessively high
It’s impossible to keep track of all the credit lines you have opened
You have a low credit score and need to make a plan for improving it
If you have filed bankruptcy, but need help navigating it
You don’t know where to begin or how to manage a budget
You can check your credit score, your debts, and your loans for free. Sign up for Credit Sesame or Credit Karma. You can login as often as you like, receive recommendations, and learn about your credit score.
What is the cost of consumer credit counseling services?
As these are non profit companies, access to Consumer Credit Counselling Services can be free. There are some add-on services such as debt management programs that may have a one-time fee. You can expect to pay between $40 and $200 for additional services.
Does credit counseling really work?
The reason that consumer credit counseling services are so effective is because they have great relationships with lenders and banks. This fee will be used to contact these organizations and provide benefits you wouldn’t otherwise qualify for.
Credit counseling services are available in many forms, with varying levels of reliability and cost. Credit counseling is worth it because not only can it be helpful for those who are experiencing financial crises (such as bankruptcy or foreclosure), but also educate people on how to avoid disasters.
How does consumer credit counseling work?
The consumer credit counseling agency usually begins by assessing your current financial situation, and your budget if you have it. They will need to know your income and analyze any debts that you may have.
Consumer Credit Counseling will also help you determine how much your monthly outgoings are.
You will also be subjected to a “soft-search” credit check by your counselor. They can access any information you might have missed and see what companies or notes you are linked to.
You’ll then focus on payment restructuring or debt management. Your counselor will determine the maximum monthly payment that you can make to begin paying off your debt if this is you.
You may also be contacted by your credit card companies to alter the payment date. In order to manage debt, it is common for an individual to pay a total to the counselor who will then take care of each debt. This streamlines the process.
A counselor can also advise you which credit lines to address first based on the interest rates. You can get referred to other tools and resources which can improve your situation.
Your consumer credit counselor will also work with you on your financial education.
You might discuss:
Budgeting effectively
Filing for bankruptcy
How to create a financial plan
How do you choose a consumer credit counseling service?
You may run into a few scams and unethical services that offer consumer credit counseling when you are researching a service. Doing your research is the best way to protect yourself.
Check to see if your chosen company is accredited and certified by the National Foundation for Credit Counseling. Also, look into the Better Business Bureau and the Financial Counseling Association of America.
You can also ensure that it has been approved by the United States Trustee program.
Next, make sure that you have a choice of services and programs. Some services may be charged extra, but there are many that are free.
When you meet potential candidates, prepare some questions to ask them.
Do I have to pay for these services?
What educational and service materials are free?
What services may cost money?
Are your counselors certified professionals?
What are the available programs?
What can you do to avoid financial problems in the future?
Avoid any agency or service who is vague or avoids answering your questions. This is particularly true if the agency or service asks for payment before answering any of your questions. Some even “guarantee’ that your credit score will improve by a certain number or percentage. This is most likely a scam.
It’s also important to find a counselor that makes you comfortable. You can try more than one counselor, as they are all free.
Credit counseling services
You will need to conduct your own research to find the best credit counseling service, but here are some you may want to take into consideration. There are many similar services offered by each, but the one you choose depends on your preferences and needs.
GreenPath
Cambridge Credit Counseling
Clearpoint Credit Counseling
Consolidated Credit
American Consumer Credit Counseling
Does Credit Counseling Damage Your Credit Score?
Credit counseling for consumers is not harmful to your credit. Credit counseling is only available to those who qualify. This soft check does not affect your credit score. It also does not affect your ability to qualify new credit lines.
Credit counseling will, in fact, improve your credit score. While you may see a slight drop in your credit score when you first start, over time, you’ll notice a significant improvement.
These sessions will teach you how to make regular payments, reduce your debt and improve your credit score.
Why Should I use a credit counseling service?
A consumer credit counseling service is a good way to start reclaiming financial health and remove burdens that are causing you stress. Credit counseling can help you improve your finances by educating yourself about the available services, the costs and the credit counseling process.
You can negotiate with creditors to get better terms of payment and lower interest rates. However, you may be intimidated by the prospect or not know how to approach them. Use a service such as Tally or Billshark for help with bills and debt, but these services have limitations.
A credit counselor will be able to provide you with valuable advice and value.
These counselors will also help you to create a budget, get your spending under control and stay on track.
Credit counseling services are a great option if you’re overwhelmed with finances, don’t know how to manage them, or need guidance.
