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Will Consumer Credit Counseling Help?

Would you ask a mechanic to diagnose your foot problem, or a hair stylist to fix your leaky roof? Not likely. Similarly, you don't want to pick the wrong business for the job when you need a consumer credit counseling service. Indeed, when you need help making sense of your financial situation and the factors that affect it, choosing the right company for the job is critical. Here are some tips to help you know what features to look for and how to identify the right financial wingman to pull you out debt safely and quickly.

What Does a Credit Counseling Service Do?

In our current economy, many consumers have been left with more questions than answers. How am I going to manage my debt now that my assets have depreciated? What if I lose my job? How did we get in this debt mess in the first place?

Credit counselors make it their business to provide you with answers to these important questions. They specialize in assessing individuals' financial situations and presenting a thorough analysis of their economic positions. Each situation is different, so the need for individualized attention and one-on-one communication is crucial to receiving sound advice and solutions tailored to your needs.

For example, depending on the solution you choose to alleviate your financial stress, the right credit counselor can teach you proper techniques for how to improve your overall financial health. Coaches can provide you with a detailed payment schedule, telling you what to pay and when, so you make consistent monthly payments over time and save the most money in interest charges. Alternatively, a credit counselor may negotiate with your creditors for lower interest rates and reduced fees, or even settle your accounts for a fraction of your debt. These actions result in you paying a single, lower payment that keeps more money in your pocket each month and helps you pay off your debt sooner.

Who Needs Consumer Credit Counseling?

But what if you're in denial about the extent of your financial debt? Do you think credit counseling is for people in situations worse than yours? While your spending and saving habits may simply need a little dusting off, which you can manage on your own, there are plenty of situations that require outside help from an expert. Here are some general guidelines to help you determine when your situation warrants a professional intervention in the form of a credit counseling service:

  • Are you struggling to pay your bills?
  • Is your spending out of hand?
  • Are your accounts in default?
  • Are you considering bankruptcy?

If you answered "yes" to any of these questions, it might be time to reach out to a credit counseling service.

For example, a low credit score may represent someone whose debt has strained their budget or become unmanageable. Alternatively, it may represent someone who fails to pay their bills on time, for whatever reason, or who defaulted on a loan. If this sounds familiar, and if your financial situation has you considering bankruptcy, then a credit counselor can guide you through that process, as well.

If your situation isn't this extreme, perhaps you just need someone to talk to who can reaffirm your concerns and help you gain perspective. Talking with a credit counselor can be like asking your girlfriend for an opinion on how you look before you head out for the night or retelling a story to your buddy about something bad that happened at work, with the goal of gaining some support for how you reacted to the situation.

Your buddies may prove to be good sounding boards for day-to-day situations, but when it comes to your personal finances, the person you typically turn to for these "gut checks" needs to be a professional consumer credit counselor. After a session with a counselor, you might even be able to handle your finances on your own. Alternatively, this person can steer you toward repayment plans such as debt management or settlement, which are designed to help with more significant credit programs.

Are There Dishonest Credit Counseling Service Providers?

Yes. You need to watch for hidden fees and charges by requiring any service provider you're considering working with to be upfront about any fees you should expect to pay for their service and how long it will take to achieve your goals.

Here are some additional characteristics to look for in a credit counseling service:

  • Has longevity in the market and a proven reputation. Select a partner that has been in business long enough (minimally three years) to have built a solid reputation with other consumers, the Better Business Bureau (BBB), and creditors. Also, talk to friends, family members and co-workers for recommendations, and shop around for the best deal by comparing each provider's service offerings, fee structures, etc.
  • Maintains established relationships with creditors. Your provider should have built trusted relationships with creditors over the years through solid service and knowledgeable, professional credit counselors.
  • Staffs qualified, compassionate counselors. These employees should be well-trained and knowledgeable coaches whom you can count on for expertise in debt management, while being customer-focused, helpful and compassionate, whether online or over the phone. Expect them to know the ins and outs of debt counseling and act interested in your success.
  • Offers ongoing support. When you're tackling your debt, knowledge is one of your best allies. Use the knowledge you gain through counseling and continue practicing these techniques. Also, take advantage of your provider's free debt management tools, tips, advice, calculators, and ongoing support to not only get out of debt, but also to change the way you think about credit and money going forward.

Everybody needs a wingman, particularly when it comes to navigating personal debt. Use these tips and make a reputable consumer credit counselor yours.

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