If you have high debt, and are in trouble, you have probably heard the term “credit counseling,” but do you understand what it is? Oftentimes this term is used in the same sentence as debt negotiation or debt settlement, but actually, it’s a completely different process. With credit counseling, you will actually work with a professional credit counselor to pay off your debt in lower, monthly payments that you can afford.
The people most likely to need credit counseling are those who are receiving troubling phone calls from bill collectors, or whose accounts have gone to collection agencies. If you think that you may benefit from using a service like this, please read on to find out the best way to work with a credit counseling company.
First, you’ll need to be able to find a good credit counseling company, and not fall victim to one of the many credit counseling scams that are out there. Start by avoiding any ads that promise you quick fixes for your credit report. There is no such thing. Instead, look for a reliable company that is accredited by Consumer Credit Counseling Services.
Next, you’ll have to meet with a professional credit counselor, and provide them with all of the details of your debt. Don’t be tempted to leave anything out because they will need the information in order to create a re-payment plan made just for you.
Now, you can sit back and allow your professional credit counselor to work for you. They will contact all of your creditors and inform them that you are trying to create a plan that will allow you pay off your debts. They will work with them all and coordinate a re-payment schedule that you can live with. Many times, they will be able to lower your interest rates in order to allow for lower payments.
Some credit counseling services offer a debt management system. What is it? Instead of having to keep up with all of the payments yourself, you will have the option of submitting one lump sum payment to the credit counseling service and they will do it for you. One note of caution here: there have been instances of a credit counseling services paying their client’s payments late, and if that happens, your credit report will suffer for it. Knowing that, be sure to check out the company thoroughly, by checking references, before signing up for their debt management program.
What will you pay for all of these services? A reputable Credit Counseling Service will only charge you a small fee, somewhere around fourteen dollars per month. If they are asking for alot of money up front, they may not have your best intests at heart. Be on the look out for potenial scams.
You should also be aware that working with a credit counseling service can do some damage to your credit report. However, the good does out weigh the bad. After all, it’s much easier to explain an honest attempt to get your finances in order than it is to explain a bankruptcy or a credit report full of charge-offs.
Credit repair programs can be inexpensive or they can cost $1000 or more. Much of the cost difference depends on which program you choose and how much debt you have. If you’re very far behind, a program could cost a couple thousand dollars. Yet some credit repair programs can cost very little, especially those used by specific creditors.
When you’re trying to decide if you should look into a program of credit repair, consider how hard it will be for you to get out of debt. A credit repair program may be one that just fixes inaccuracies on your credit report, or it could be one that helps you with a system of repayment.
Some credit repair programs are designed for people who are struggling under crushing debt. These people may need someone to negotiate with their creditors for lower balances, lower interest or more.
Some programs can arrange for you to pay only a little more than half of what you owe. Other programs help settle your debts for less and may also negotiate for no more interest on what you owe. Some programs may combine both smaller balances and no or low interest, which can help you get your debts paid off.
If you really can’t make your payments on time or feel that you’re slipping under, a program could work for you. If you can keep up with your payments and keep paying the balances down, then that’s your best option. Any other options like credit counseling or credit repair programs do leave dings on your credit.
That’s because credit counseling programs may require the cards to be cancelled. Several cancelled cards with outstanding balances can hurt your credit score. And arranging smaller balances through programs for credit repair can hurt your credit because the charge-off amount will show.
Credit repair programs can help you in the long run, however. It’s better to have a charge-off than months of late payments and missed payments. Also, if you’re unable to make your payments on time, your amount of available credit is probably shrinking as the late fees add up.
When your credit cards reach their limit and you have less and less credit available, your credit score will suffer. When you have debt that equals too much of your available credit, it’s known as a bad debt/credit ratio. It can even make the interest rates on cards you do pay on time go up.
If you have a lot of cards that are cancelled at once, it leaves you with a lot of debt and no available credit. This is why credit counseling is not always a good option for your credit score.
You should do everything you can to resolve your credit problems on your own. But if you can’t, it’s better to get help than to keep missing payments or making them late. This will hurt you more than anything in the long wrong.
Each late payment is another month your credit score can’t start to improve. Look into credit repair programs before you do more damage.
Many of us wonder even if it is this legal to do so. Well, YES, you are given the right under the Fair Credit Reporting Act (FCRA), including the right to challenge inaccurate, misleading and obsolete items appearing on your credit report. Disputing items on your credit report is your legal right (see the Fair Credit Reporting Act)! This article is meant to provide important information about the possibility of having credit restoration.
For starters, you should know on what is your credit score based. Credit scoring is based on many factors that may include:
• Amount of available credit
• Payment history
• Recent requests for credit
• Amount of credit currently being used
• Length of credit history
Under the Equal Credit Opportunity Act, credit scoring may not use gender, marital status, national origin, race, or religion as factors.
There are many of you who will say “OK, but how long does it take? Of course, everyone wants you to see results immediately. Most people can see progress within the first 45 days of credit repair services, although everyone’s credit history is different. Don’t ignore the fact that the majority of time is spent waiting for the credit bureaus to respond to requests. It takes great effort in getting the disputes to the bureaus as fast as possible. As a reference, the average person with 7-10 inaccurate, misleading or obsolete items on each credit report should be prepared for a 3-4 month commitment.
Maricopa Credit organizations have been helping people get rid of negative items on their credit reports, increasing their FICO score dramatically. With a higher FICO score, their clients have been able to refinance their auto and home loans, saving a considerable amount of money every single month!
Just keep in mind that you’d still have to pay your bills. When a negative credit report listing is deleted, the actual debt remains. You still owe the same amount of money that you owed to begin with. If you don’t pay the debt, the creditor or collection agency could always report the item again. So removing the listing without addressing the debt is only a temporary solution.