Credit & Debt Counseling

Credit & debt counseling is a multifaceted service to help consumers deal with debt responsibly. It not only involves debt education, but it also involves debt management and debt settlement help. This is a great option for anyone who is having credit or debt problems. Even if you don’t have serious debt problems now, debt counseling can help you to establish healthy spending habits and health debt management habits.  There are two main facets to debt counseling:

1. Financial guidance, in which the counselor goes through all of your relevant financial information - salary, assets, and outstanding debts - and works out a budget plan.  
2. The above applies but the counselor also contacts your creditors to reduce the overall amount of your debt, reduce the interest rate on the debt, and reduce your monthly payments.   

Find a Debt Counselor

If you are interested in credit/debt counseling your first step will be to find a qualified debt counselor.  You must be careful about a couple of key issues.  Some unscrupulous debt counselors will charge high upfront fees.  In other cases, a debt counselor will negotiate to reduce your monthly debt payments, but when you pay the lower amount it still registers as a default, as the payment is seen as being below the minimum. 

That's the bad news.  The good news is that there are many legitimate debt counselors available.  When shopping around for a debt counselor you will want to make sure that you select a company that has a good reputation for helping people and charges reasonable fees. A good way to find trustworthy credit counselors is to use a referral service or to visit a non-profit credit counseling organization.  Also, check with the Better Business Bureau to ensure that there have been no problems in the past.  

Select a Credit/Debt Counseling Program

After you have found a debt counseling service, your next step is to determine what type of counseling you need. A good way to figure this out is to request an evaluation of your current finances. The debt counselor will take a look at your income, your debt and the condition of your current debt accounts. They will then be able to advise you on which steps you can take to improve your debt problems.  In some cases, renegotiation of debt payments will not be necessary.

Select an Option

When the credit/debt counseling agent reviews your case they may offer you several solutions. They will also go over the pros and cons of each of these options. For example, debt settlement may be a great short term solution to your debt problems; however, it may also negatively impact your FICO score and credit profile for several years. You will need to evaluate all of your options and their pros and cons before selecting the solution that you feel comfortable with.

By and large, debt counseling is mainly for people who are having deep problems with credit cards and other types of debts. However, this does not always have to be the case, as it can be highly effective to meet with a counselor if you're having difficulty setting a budget and paying debts on time.