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   Credit Counseling

Credit Counseling, also known as consumer credit counseling, debt management, or various other aliases may certainly help some people who are in the “minimum payment plan” to lower their monthly payments and the time frame which they will pay their debts back. There is however many things to understand about credit counseling before deciding to go this route.Credit Counseling

In a credit counseling plan a person will make one monthly payment to the credit counseling company. The credit counseling company will attempt to negotiate the interest rates and payback time frame (usually 5 years or less) for the consumer to pay back their debts. The consumer will be paying back the full balances that are owed as well as interest. Some credit counseling companies charge a fee for their services, others do not and are classified as “non-profit”. Non-profit does not necessarily mean that there is no cost to the consumer, but that the business makes its money elsewhere. This is the controversial part. Most of the credit counseling companies receive their profits from the credit card companies themselves! Don’t be fooled by “NON-PROFIT” and be one of the many who assume that makes a company a good one.

In addition, credit counselors may say that their program is not bad for your credit. This is a hugely controversial topic because when you join with them they are obligated to report to the credit bureaus that you are in a debt management program, and while this does not affect your FICO score directly, it does affect your overall “credit worthiness”. While credit card companies may issue credit cards to people with relatively low scores, a mortgage broker or car lender typically will scrutinize the entire credit report more extensively and verify employment and income information. Some lenders view a prospective customer's participation in a Debt Management Plan as indicative of the customer being unfit to manage their finances, and thus may throw out the entire credit application.
Credit counseling may be a good option for some, it is very important that before you sign up with any company that you fully understand your other options. When you have settled on the right path, and are ready to determine the right company in that path, make sure you investigate them and verify that they have a good standing and low complaints on the Better Business Bureau. Many credit counseling companies have a high amount of complaints on the BBB, and for many different reasons.

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* Disclaimer: Individual results may vary based on ability to save funds, amount of debt, willingness of creditors to negotiate, and the successful completion of all program terms. Program does not assume or pay any debts, nor provide legal or tax advice. Prudence should always be taken by consumers when reviewing contracts and disclosure materials. Emerson & Douglas Associates, LLC services not available in all states. For more details see our Disclosures page.
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