Living paycheck is no fun, especially when you have credit card bills and other debts to pay. When you’re having trouble managing your credit, you might consider seeking professional help through consumer credit counseling. Before you choose credit counseling, there are several factors to consider.
Can You Do It On Your Own?
Theoretically, there is nothing a credit counselor can do that you can’t do on your own. On the other hand, many creditors are more willing to accept lower payments and interest rate when approached by a credit counseling agency. If you haven’t changed your spending habits and learned self-discipline, it’s probably better to seek professional assistance with your credit.
Is Information Free?
The credit counseling agency should provide you with free information about the company and their services, even without obtaining information about your financial situation. If an agency presses you for information about your debt when you’ve only requested information, the agency is probably more concerned about your business than your credit.
How Will Your Credit Be Affected?
Find out if and how your debt management plan will be reported to any credit bureaus. Your credit report may or may not be updated to show that you are in a credit counseling program. When this information is reported, future applications for credit and loans may be denied.
Is There More Than One Option?
The credit counseling agency should offer you a solution besides a debt management plan. They should also provide money management and budgeting advice to you. Stay away from companies that only have a debt management plan as a solution.
How Are Creditors Paid?
Creditors should be paid in a timely manner in the correct billing cycle. If the credit counselor doesn’t pay your creditors on time, your credit will be affected. Many creditors will cancel your debt management plan if two or more payments are missed. At that time, the regular interest rate and minimum payment will be reinstated.
Can You Afford The Payment Schedule?
The reason you’re considering credit counseling is because you currently have difficulty making payments. If you can’t afford the payment schedule proposed by the credit counselor, then the situation doesn’t benefit you.
What Are the Fees?
Make sure any fees charged by the credit counseling agency are reasonable. If a particular agency’s fees are more than 20% of your monthly payment, you should take your services elsewhere.
Will You Have Access To Account Activity?
You need to know what’s happening with your accounts – if your payments are being received, if and when payments are being disbursed to your creditors, and the amount of the payments made to creditors. The credit counseling agency you choose should make this information available via phone, mail, or internet.
