If you are in trouble financially, 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. A credit counselor will work with you to pay off your debt in smaller, monthly lump sum payments that you can afford.
Most people who seek credit counseling 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, the following outline details best way to work with a credit counseling service.
First, identify a good credit counseling service. Beware of the many 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 accredited by Consumer Credit Counseling Services. I’d prefer a Christian organization because they’re more likely to understand my perspective.
Even so it’s best to check any advice against your understanding of scripture. For example, one site supposedly quoting the bible stating “Money is the root of all evil”. That verse (1 Timothy 6:10) says “The LOVE of money is the root of all evil”. To me it’s a big warning sign. If they can’t quote this one scripture in context, what do they do with the rest?
Next, you’ll have to meet with your credit counselor, and provide them with all of the details of your debt. Don’t be tempted to leave anything out because he or she will need that information in order to create a workable re-payment schedule for you.
Now, you’ll get to sit back and allow the credit counselor to work for you. They will contact all of your lenders 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 missing their client’s payments, and if that happens, your credit report will suffer for it. Be sure to check out the company thoroughly before signing up for their debt management program.
What will you pay for all of these services? A reputable company will only charge you a small fee, somewhere around fourteen dollars per month. That’s another way to know if you are dealing with a scam operation—if they want a lot of money up front, it’s almost a guarantee that they don’t have your best interests at heart.
You should be aware that working with a credit counseling service can do some damage to your credit report. However, for most people who are at the stage in their financial lives who would even consider such a move, would most likely benefit from it. 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 report full of charge-offs.
In Christ's Name,
Andy Havens
Andy Havens is a writer, marketer and businessman who also happens to be a Christian...or is that the other way around?
