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How Credit Counseling Agencies Can Help You

Credit counseling agencies

Having a lot of debt is not a pleasant experience. The goal of most credit counseling agencies is to help you learn to manage your debt and to take control of your financial life. Unfortunately, there’s a considerable number of myths and misconceptions floating around about what the goal or purpose of a credit counselor is. Knowing what a credit counseling agency can, should, and shouldn’t do will help you find one that will help you create a budget and regain control of your financial life.

The Cost

One common misconception about credit counseling is that the people involved in it are there for their own profit. While there may be some credit counseling agencies that charge high fees, most don’t—and shouldn’t. A good many, such as CESI, are nonprofit and offer free counseling services.

The Federal Trade Commission recommends avoiding agencies that charge a high fee upfront and agencies that expect you to pay them for information. The FTC also advises that you should not work with an agency that won’t work around your financial situation and that you should be aware of the way the counselors are paid. For example, a counselor shouldn’t be paid based on how many services you sign up for, as he might then pressure you to sign up for services you don’t really need.

Available Services

Credit counseling isn’t one-size-fits-all. You might need help creating a budget, while another person may need help coming up with a debt management plan. Find out the services the agency offers to see if it would be a good fit for you. You want an agency that will look at the big picture when it comes to your debt and financial future, instead of one that tries to push you into a debt management plan when that’s not the best option. Your counselor should be able to explain how each option will help you and let you know if there are any disadvantages or drawbacks to a solution.

Credit counselors aren’t completely hands-off. The ball might be in your court, but a counselor can help work with your creditors to come up with a solution, if that’s what you need.

Impact on Your Credit

You might fear contacting a credit counselor because you worry it will negatively affect your credit score. Working with a credit counseling agency won’t have a negative impact on your credit. In fact, it’s likely to have the opposite effect. As you learn to manage your debt and work within a budget, you should see your credit score improve with time.

Better Than Bankruptcy

While declaring bankruptcy might seem like a quick way to get a fresh start, in many cases, it’s not a better option than working with a credit counselor. The bankruptcy stays on your credit report for at least seven years and impacts your ability to get new credit for some years. Filing bankruptcy doesn’t teach you the skills you need to learn to manage your finances and debt in the future.

Your credit counselor should be on your side. When you work with a credit counselor, you should rest assured that your concerns are held in confidence and that the advice you’re given will help you make the best financial decisions possible going forward.

Image source: Flickr

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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.

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