Credit Issues and Advice
Personal Debt Issues

Credit Counseling, Is it Right for You?

If you are overwhelmed by debt and feel you are in over your head, then you may want to consider consulting with a credit counseling agency to help you work your way out from under it.  A reputable credit counseling agency will help you by reviewing your overall finances and establishing a budget for you at no charge.  These agencies are set up by the credit card companies themselves as penance for their free wheeling, credit peddling ways, just think of how many credit card solicitations you typically receive in the mail each week.  If applicable to your situation, a credit counselor may recommend that you participate in a debt management program to help you schedule the payoff of your debt more quickly and efficiently.  These programs can help you to reduce the interest rates on your debts and possibly wipe out any penalties which may have accumulated.  Normally the cost for setting up the debt-management program is in the $50 range and then approximately 5% of your total monthly payment is made under the program as a continuing service fee.  Typically the program is geared towards troubled credit users who can completely retire (or pay down to nothing) their debts in 5 years or less.   

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There is a common concern amongst those experiencing debt problems that if they were to contact and sign up with a credit counseling agency that their credit score would be negatively impacted.  However seeking assistance in establishing a budget or to help with some financial planning should not impact your score.  And most credit counseling agencies will not report debt-management program participants but you should ask the question directly if you are unclear about your specific credit counseling agencies' policy.   However if you have certain debts which are not being paid as originally agreed upon with a creditor, that is if the debt has been re-negotiated with a reduced interest rate or payment as part of your debt-management program, then your credit score may be effected.   It is important to note that once these accounts have been paid and settled, the information will remain on your credit report for 10 years, while any adverse or negative information associated with the account will remain on your report for 7 years.      

Credit counseling can be an invaluable resource in preventing damage or halting further damage to your credit score.  Debt-management programs can keep you on track in paying off your debts and help keep you out of debt permanently.  The advantage of having on-going counseling in this area, along with some needed over sight, can go a long way in keeping you on the straight and narrow and preventing you from slipping back into your old credit abusing ways.  Getting into debt is the easy part and unfortunately many credit card companies make it far too easy, but it takes a complete shift in how you look at and use credit, along with some serious discipline, to get out of debt and stay that way. 

Nancy Osborne, ERATE.comNancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.

"I am addicted to Bloomberg TV" says Nancy.


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