How Will Credit Counseling Services Affect My Credit Rating?
Many people today face various financial challenges particularly in making both ends meet what with the prices of major commodities such as gasoline continuously going up. This causes a domino effect resulting in the prices of other goods such as flour, canned food and rice also increasing. The best route consumers opt for then is to get a loan or use their credit cards in purchasing their basic necessities in life.
With an unmanageable financial situation, sometimes it’s inevitable that people incur huge debts giving them a feeling of hopelessness. But there’s still a way out and declaring bankruptcy should never be considered as an option. The best solution here is to consult a consumer credit counseling service.
Help for financial woes
A credit counseling service can help anyone facing financial problems notably unsecured debts such as personal loans, credit card debts and medical care bills. The goal of this service is to come up with a debt management plan that will allow consumers to get out of debt using a disciplined approach and a specific monthly expenditure that they can stick to for the long term. This type of service is normally provided by professional counselors with sufficient training in personal finance.
For those experiencing difficulties managing their credit cards, a credit counselor can assist you in renegotiating for a lower interest rate. In some cases, a good counselor can request a credit card company to waive some of your late fees or ask for voluntary reductions in the principal owed.
Consolidating your credit card debt into just one monthly payment is another function of a credit counseling service. If you get help on this subject matter, you can lower your monthly payments by as much as 40 to 50 percent and avoid keeping up with the high interest charges.
Availing of a credit counseling service not only benefits the consumer but the creditors as well. This is a better alternative than declaring bankruptcy and letting your credit rating suffer for many years. Also, this is a good option than allowing credit companies to suffer a write-off or force them to take legal action against you.
Choosing the service
Be wary in selecting a credit counseling service to help you with your financial situation. A good choice would be a non-profit organization. You can also look for services accredited through the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.
Avoid those that charge exorbitant fees and make grand promises such as eliminating your entire debt and that negotiations with your creditors won’t have any impact on your credit rating. Keep in mind that clients who use these services are required to pay a monthly counseling service fee. The money will be used to pay the client’s debt and the counselor’s fee for managing your debts.
Another warning sign from credit counseling services are missed or late payments. If your credit counselor is involved in your debt management plan, then he or she should be responsible for making all your payments in a timely manner. If, however, the creditor is excluded in the plan, you will have to continue to make payments to that creditor yourself. Overall, be watchful that you’re not being taken advantage of.
