- What do you mean by credit counseling?
- How do you locate a reliable credit counseling agency?
- What should you expect out of a credit counseling session?
- What effect will credit counseling have on my credit?
- How much should be the cost of a credit counseling program?
What do you mean by credit counseling?
Credit counseling is a financial service that provides people with better money management knowledge and skills. These are given only after careful analysis of an individualâ€™s current financial condition done by a certified credit counselor. These credit counselors can work under an organization or provide independent service to their clients, provided they have the necessary license to do so.
So, if youâ€™ve been looking for ways to resolve your financial woes, then credit counseling might just prove to be a smart decision. However, prior to opting for any such services, it is important that you conduct some extensive research on the topic.
How do you locate a reliable credit counseling agency?
Irrespective of your financial problems and needs, it is vital for you to find out the most suitable credit counseling agency (or may be a credit counselor) for yourself.
For that reason, you may well use the below mentioned guidelines to identify legitimate credit counseling agencies and save yourself from the horrors of a scam:
- Check their non-profit status â€“ A lot of agencies have been reported to exploit the â€˜non-profit statusâ€™ for their commercial interests. This is why it becomes imperative on your part to check a credit counseling agencyâ€™s official status as a legitimate non-profit organization before signing up for their services. In this case, you need to look for their status under Section 501(c)(3) that has been mentioned in the Internal Revenue Service Code (IRC).
- Find out their third party accreditation â€“ Another very effective way to find out whether or not a particular credit counseling agency is legitimate one is its accreditation from reputable independent third parties. You may bank upon organizations like National Foundation for Credit Counseling (NFCC), Association of Independent Consumer Credit Counseling Agencies (AICCCA) in order to achieve your purpose. Moreover, you can also rely on the Council of Accreditation (COA), a leading pro-consumer organization of the nation to locate a legitimate credit counseling agency.
What should you expect out of a credit counseling session?
In case of a confidential credit counseling session, a competent credit counselor will review your current financial health. Credit counselors will work out a financial strategy thatâ€™ll help you the most in managing your finances well.
Primarily, theyâ€™ll study your monthly income, living costs and all of your debt obligations to arrive at a plan to either cut down or stay away from debt. In addition, youâ€™ll be given suggestions on the ways to develop a prudent monthly budget and to become smarter with your money saving tactics.
In a traditional credit counseling program, your credit counselor will ask for and validate your personal information including your monthly earnings.
- Re-evaluate your budget and discuss your spending behavior.
- Find out whether or not you are being able to make both your ends meet with whatever you earn at the moment.
- Analyze your assets and obligations.
- The credit counselors will ask you for all the relevant credit statements.
- Choose the most appropriate debt relief alternative based on your financial condition.
- Work out the most suitable debt repayment plan for you.
What effect will credit counseling have on my credit?
This is one of the most crucial facts that you must be aware of before enrolling yourself into any such financial service. The truth here in this case is that if you miss making timely debt repayments (like mortgage or credit cards), then it is very likely to appear on credit report sooner rather later. There is no guaranteed way to clean up your credit report of all the negative items within a short span of time. So, you mustnâ€™t give in to the lure of any credit counseling agency that promises to do just that. Instead, offering such dubious service is illegal.
However, do heed the tips of your counselor and mark his/her commitment to help you re-build your credit rating. Here in this program, working on some really good credit repair tips is much better than to sit idle over a tainted credit report. So, pay down your debts and implement the suggestions of your counselor that doesnâ€™t promise you of any guaranteed results.
How much should be the cost of a credit counseling program?
Any debt relief program should be able to furnish you with a proper answer regarding the total cost of the same. In case, your credit counseling agency asks you to pay exorbitant service fees, then you need to opt for a different agency. Take for instance, if your credit counseling agency demands for your first monthly debt payment amount as a compensation for all the services provided by them, then such an organization is no doubt a for-profit debt relief company.
Actually, a lawful non-profit credit counseling agency may charge you less than $100, if not free for their services. However, if you are getting a good bargain, then there is no harm in working with such an agency.
Finally, you must acquaint yourself about the mode of service provided by your chosen credit counseling agency. It can happen face-to-face, over the telephone or even on the Internet. So, the key point here is what will work the most for you as far as resolving financial woes are concerned.