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Many Americans today are struggling to make ends meet. Daily expenses for things like gasoline and food keep rising, while paychecks remain stagnant or disappear altogether due to job loss or unemployment. As a result, many Americans are racking up big debt on their credit cards and wonder how or if they’ll ever pay them off.
For some, working with a credit counseling agency can provide help creating realistic budgets and implementing strategies for paying off debts. The key, however, is to find a reputable company that will provide answers and solutions tailored to your needs.
Here are some tips on what to expect when working with a credit counseling agency and how to find a credible company. Armed with this information, you’ll be better prepared to determine whether the services offered by credit counseling agencies can help you avoid financial ruin and achieve your goals.
What to Expect
Thanks to technology, you can receive services from a credit counseling agency in various ways: in-person, over the telephone, through live Internet chats and educational forums, and even by U.S. mail. When you first contact an agency, they will instruct you about what material you need to gather for your counseling session. This often includes information about your assets, expenses, and income (e.g., copies of your recent credit card statements, pay stubs, and amounts estimating monthly expenses for things like food, transportation, entertainment, etc.).
From there, a trained professional working for a credit counseling agency will assess your financial situation. Their ability to provide individualized attention and one-on-one communication is crucial. For example, your counselor may provide you with a detailed payment schedule, telling you what to pay and when, so you make regular monthly payments and ultimately save money in interest charges. Alternatively, a credit counselor may negotiate with your creditors for reduced interest rates and fees, or even settle your accounts for a fraction of your debt. These actions will ideally result in you paying a single, lower monthly payment that can help you pay off your debt more quickly.
Confidentiality & Costs
Talking with an expert at a credit counseling agency should be like talking to a doctor or lawyer. Everything you say is kept between you and the credit counseling agency unless you give your counselor approval to discuss your situation with someone else, such as a creditor. You should expect your counselor to offer compassion without judgment. Any reputable credit counseling agency should staff only qualified, compassionate counselors who are well-trained and knowledgeable coaches.
But, just as speaking with a doctor or lawyer doesn’t usually come for free, working with a credit counseling agency can cost money, too, depending on the level of service you need. For example, some agencies offer free initial counseling sessions and will then charge fees if you enroll in a debt settlement or debt management plan.
Note that while some agencies operate under a non-profit status that doesn’t mean their services are free. Expect to pay some sort of monthly maintenance fee, the amount of which will vary from state-to-state. Also, if the credit counseling agency requests upfront payment before you see any success, this violates the Credit Repair Organizations Act, which forbids advance payment for services. Finally, watch for hidden fees and charges by requiring any agency you’re considering to be upfront about any fees you will be asked to pay (get them in writing) and how long they predict it will take to complete your debt plan.
Finding the Right Credit Counseling Agency
So what’s the best way to find the best credit counseling agency? Start with identifying various credit counseling agencies that are licensed and regulated to do business in your state.
Also, only consider recognized and respected agencies that have been in business for several years, adhere to strict business standards, and have sound reputations with other consumers, the Better Business Bureau, and creditors. Interview several agencies, and ask friends, relatives, or co-workers for recommendations, as well.
Next, contact each credit counseling agency you’re considering and ask directed questions about their services. Not sure what to ask? CareOne’s Debt Consolidation Provider Checklist offers a suggested list of topics so you can compare fee structures and assess each company’s reputation, accreditations, and service offerings.
Once you choose a credit counseling agency, get ready to do some real work. But realize that you should not expect a magic, quick fix or a sudden improvement in your credit score. Credit counseling agencies can’t do anything magical to erase the technically accurate reports on your credit report.
However, actions you take, such as making consistent payments as a result of following a plan you create with your counselor, can positively impact your score over the long run. Similarly, some actions, such as participating in debt settlement, may decrease your score temporarily before lifting it again as you work through your debt.
The impact on your credit report ultimately depends on what you do and how quickly you can repay your debt. Your counselor can advise you about the potential credit impacts of various decisions.
When you’re tackling your debt, the knowledge you can gain by working with an approved credit counseling agency is one of your best allies. Use the knowledge you gain through counseling and take advantage of the tools, tips, advice, calculators, and ongoing support offered by the agency to not only get out of debt, but to teach you how to live within your means and avoid incurring new debts.
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