Consumer credit counseling is beneficial to those who find themselves buried in debt. It is important to know how the system works, how it can help or possibly hurt you on your credit report.
Function
Consumer credit counseling services help people pay off their debts and educate on them on money management. The debtor pays a credit counselor who then makes payments to the creditors. It is a great way to streamline debt.
Features
Individuals release information about their current income level as well as the debts they need to make payments on to a certified credit counselor. This counselor will devise a workable plan to allow a debtor to begin payments based on what they owe and what they currently earn.
Benefits
The obvious benefits credit counseling are getting interest rates lowered, penalties reduced or eliminated and making a single payment instead of multiple payments.
Effects
Credit counseling should have a positive effect on credit as long as you are working with a reputable firm. A knowledgeable agent will make sure that your creditors do not list you as delinquent while you are attempting to pay back your debts. Most lenders will look favorably upon someone who is trying to pay what they owe as opposed to someone who defaults and does not make any attempt to repay.
Warning
Check out credit counseling services very carefully before agreeing to let them be your intermediary with creditors. They should have reasonable fees and be registered and in good standing with the Better Business Bureau. If they make unrealistic guarantees or ask for large sums of money upfront, they are likely a sham organization. A reputable counseling firm can help improve your credit score, a fly-by-night operation will take your money and may damage your credit even further.
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