Can a Consumer Credit Counseling Service Help You?

Consumer Credit Counseling, sometimes called CCCS, is a service that typically offers debt management assistance in the form of budget counseling, various financial educational programs and assistance in using credit properly and avoiding bankruptcy.

Most of the credit counseling organizations(there are hundreds) are non-profit and offer their services online, over the phone, or in person. In addition to counseling and education services, most Credit Counseling Agencies will offer a Debt Management Plan (DMP) in which you make one monthly payment to the CCCS agency, who pays your creditors on your behalf.

Benefits of Credit Counseling

Going through a credit counseling agency will generally:

• reduce your interest rates and monthly payments,
• stop the majority of late and over-the-limit fees and
• they will work with the credit reporting agencies to limit negative marks on your credit file.

A consumer credit counseling agency will usually be able to negotiate with your creditors to stop the harassing collection calls and be the interface between you and the creditor.

The Downside of Credit Counseling

The biggest downside of credit counseling is that unfortunately, the debt relief stops at lower payments and interest rates.

You are still obligated to pay back the full balance of the loan, with interest. You are still looking at years of loan payments before you are out of debt. Also, your are restricted from using credit while you are enrolled in the program.

Credit counseling does not provide any forgiveness of debt, unlike debt settlement.

Will my Credit Score suffer if I sign up for Credit Counseling?

Conventional wisdom is that enrolling in a debt management program with a credit counseling agency will not have an adverse effect on your credit score.

However, it may prevent you from getting more revolving, unsecured credit when a potential lender reviews your credit report.

If you are enrolled in a DMP, your creditor will mark “credit counseling” or “DMP” on your report to signify your enrollment. After completing the program, this mark may or may not stay on your report, depending on your creditor.

Other Important Considerations

An often unmentioned fact is that most of the consumer credit counseling agencies are primarily funded by the credit card industry. Consider this fact when you enroll in a debt management program with a counseling agency.

In general, they counseling agencies are mainly concerned about keep you afloat so you can continue to make monthly payments.

If you have no other choice than to enter debt counseling for the purpose of repaying your creditors, then you have some decisions to make on what to include in the process.

With so much talk of bailouts across the country, people are naturally wondering if their government will also be offering assistance to help individual get out from under credit card debt. Consumer credit card debt is becoming an epidemic, with many people owing outstanding balances they cannot afford to pay off. In years past, it was relatively easy to secure a credit card and run up sizable debts in a short period of time. The credit companies were making big bucks off of the late fees and penalties and kept extending credit to those who was not the most credit worthy. As people are becoming overcome with credit card debts, it is certainly understandable that people want to rely on their government to help them in their time of need but is it a plausible expectation?

You’ve seem ‘em. The commercials for consumer credit counseling agencies are all over TV and you may think that they’ll provide you the perfect solution for your debt problems.

But, before you call one of them, it’s important for you to carefully consider each offer. Don’t assume that one company is good to work with just because they say they are working for you. Just like using any other services, finding a reliable credit counseling agency will make all of the difference.

Many people who enter into a credit counseling program have heard that this credit counseling program will drop their credit score. However, this is mostly untrue.