An Overview on Credit Counseling

Sometimes, resolving a serious debt problem is best done with help from a trusted credit counseling agency. However, with so many organizations offering different types of debt relief services, it may be difficult to distinguish which among these companies can provide true assistance. In this article, let’s discuss the things that you can expect from a genuine credit counseling organization.

A Closer Look at Your Personal Finances

A trust-worthy credit counsellor would never suggest a solution without doing proper assessment of the client’s financial background. For instance, you should not be immediately told to apply for a debt consolidation loan unless you have finished discussing details of your debts with your counsellor. Yes, to be able to give a sound advice, your credit counselor must not only define the problem but to understand the root of the problem as well.

Some people may be stuck in bad debt because of past due loan payments while others might be primarily dealing with credit card debt. For others, the true cause of the debt problem could be behavioural issues such as compulsive spending or gambling addiction. Then there are also consumers who get stuck in bad debt because of unfortunate events that are beyond their control such as loss of job, divorce, or illness.

Some agencies are simply out to make profits by offering debt consolidation loans to their clients so they can impose interest rates and hidden charges. There are also credit counsellors who may only earn commissions from customers who sign up for the agencies Debt Management Program. Therefore, avoid credit counseling agencies that recommend Debt Management Program or Debt Consolidation Loan without conducting an evaluation of your personal credit report.

Helping You Create a Budget Plan that Works

A genuine credit counselling agency’s main purpose is not just to help a customer get out of bad debt or manage debt repayment but also to help people manage their personal finances more effectively. Aside from a debt repayment plan, your credit counselor should also give you sound advice on how you can avoid uncontrolled spending, cut back on unnecessary cost, build up savings, and other financial management skills.

Help Your Execute the Plan

After evaluating your financial situation, your counsellor must help the client to execute the debt repayment plan until he/she has achieved debt recovery. As a client, you might need to attend credit counselling sessions so that your counsellor can check the progress you’ve been making with your credit history.

Credibility and Reputation

Before signing up for a credit counseling service, do your own investigation about the company’s credibility and reputation. Is it a member of major credit counselling organizations like The National Foundation for Credit Counseling (http://www.nfcc.org/ ) and the Association of Independent Credit Counseling Agencies (http://www.aiccca.org/)? Does it have a good record with the Better Business Bureau (BBB)?

If you can’t find convincing proof that the credit counseling organization is legitimate, then do not take the risk by signing up with their service, even if the agency claims to be a “non-profit” one.