When someone finds themselves in debt and they just don't know where to turn, they can find some much needed help by visiting a credit counseling agency. There are thousands of these agencies across the country and finding the right one is the key to you getting out of debt and staying that way.
Considerations
Being in debt can be very stressful and sometimes so overwhelming you don't know what to do. Fortunately there is help out there. The first thing you want to ask yourself is, if you need counseling or if your credit is something you can fix yourself. If you are just starting to have trouble paying your credit cards then you might want to call the company and see if you can work a payment schedule out with them first. In most cases the credit card companies will try to work with you if you have a good paying record up until now. If you are at the point where you are paying multiple late fees or taking cash advances from one credit card to pay another than you are probably a good candidate for credit counseling.
Warning
Once you have determined to seek credit counseling you will want to investigate a few agencies. You can go to the Federal Trade Commissions Website for a list of questions to ask the agency before you sign up. Ask for a list of their fees even if they say they are a non-profit organization. Some non-profits ask for a mandatory donation. Most agencies though will charge a small fee to set up the account and administration fee. The National Foundation of Credit Counseling has a list of Agencies listed by state and the FTC will have a list of all agencies that have had complaints filed against them. The last thing you want to do at this point is end in more debt and not get the help you need.
Benefits
When you start working with an agency they will ask you many questions about your loans, credit cards and income. You will want to be as honest and give them as much information as possible. The counselors will find out what you can afford to pay each month and negotiate with your creditors to accept smaller monthly payments and have late fees and rates reduced. You will pay the agency your monthly payment and they will send it out to each of your creditors. You will set up for a plan that could take as little as 6 months or as long as 2 years depending on your debt. While you are involved with the program you will have to stop using credit cards and attend some financial classes to learn how to handle your money better in the future. One of the biggest benefits is the bill collectors stop calling at all hours of the day and night giving you less stress to deal with.
Potential
With credit counseling you may prevent your credit score from dropping too much if you start before it gets too delinquent. If you complete the program you will come out with a better understanding of how to handle your credit. Some credit agencies even offer education on buying homes and investing money for your future. You will learn how to build your credit back up. This is important, not to be able to obtain more credit cards, but because many things you need every day are based upon your credit score. Insurance companies base your rates on your credit score, renting a house may not even be possible if you have a bad score and it's even used for getting a cell phone contract. You're whole life is just a lot easier with good credit.
Misconceptions
There are some misconceptions about credit counseling. One is that your credit score is ruined by going to counseling. The fact is that your credit score may go down if the creditors accept less than the full balance. However, even if you negotiated this with the creditor the result would be the same. And the fact that you can't make your payments on time will reduce your credit score. Another is that you will never be able to regain your credit or buy a home. Nothing is further from the truth. By following the plan and getting the financial education you will be in a better position to build your credit up and learn how to and where to get a mortgage to buy a home. The truth is if you are in a bad financial situation already, a good credit counseling agency can only help you make it better.
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