The Best Non-Profit Credit Counseling

Many people feel overwhelmed by their credit card debt. They may struggle to make the monthly minimum payments, fall behind on their bills or feel unable to handle to get out from under the debt alone. Nonprofit credit counseling agencies help people develop a payment plan and pay their off their credit card debt. However, not all counseling services are created equal and consumers should consider factors like fees, the effect on their credit score and the benefits of using the agency before signing up.

Benefits

A nonprofit credit counseling service works as a middleman between a consumer and his creditors. The counseling service will work with a consumer to create a payment plan to repay all of his credit card debt. The consumer pays the credit counseling service one monthly payment and the credit counseling service pays the creditors on his behalf. Repayment plans typically last three to five years, according to Bankrate. Credit counseling services also provide consumers with counseling services to teach them how to build and maintain a budget.

Fees

The majority of credit counseling agencies, even those that are nonprofit, charge a fee for their services. Typically, the agency will charge a start-up fee. This fee covers the cost of opening an account with the credit counseling agency and developing a repayment plan with a counselor. The cost of these fees varies between different credit counseling agencies. However, the best nonprofit agencies charge low or reasonable fees to the customers. Consumers can shop around between agencies to find the best rates.

Effect

When a consumer enters into a debt repayment plan with a credit counseling agency, his creditors may report that payments are being made through a counseling service, according to Bankrate. While this notation will not lower a consumer's credit score, it may make it difficult for him to obtain new credit as lenders will be cautious about extending credit to someone in a debt repayment plan. However, when the consumer completes the plan, any notation of a credit counseling agency will be removed from his report.

Tips

Consumers should research any nonprofit credit counselor they are considering before signing up to ensure they use the best agency possible. Consumers have the right to speak with a representative directly about the services offered by the agency. Consumers should pay special attention to the fees charged by the agency. According to Bankrate, the consumer should ask that the agency put any fees in writing before they sign up.