People are more in debt than ever, which leaves a lot of people considering how they are going to pay off their debts. With interest rates climbing and other issues causing people a lot of financial strain, one option that many are considering is going through consumer credit counseling and debt management plans. There are commercials on TV and offers all over the web. For those who are in a bad situation financially, these companies may be a good option for you. Here are some tips for people who are considering something along those lines.
Do your research: Unfortunately, there are some consumer credit counseling agencies with bad reputations. Sometimes the counselors aren’t too honest and people do have problems. Before making an agreement with any company, be sure to your research. The first place to check is through the Department of Justice Website of approved credit counseling agencies at http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm. They have a listing of approved agencies by state. Check with sources like the Better Business Bureau to see if there have been a great deal of complaints. Go with a company with a good reputation.
Be prepared to answer a lot of questions: In a preliminary interview with a credit counselor, there are going to be a lot of questions asked. Basically, you a person is asked about every source of income they have. In addition, that person is going to have to list off all of their debts. Not the most pleasant of feelings to have to justify what you spend in a month, but it is necessary. Even though it may be a little embarrassing, be completely honest (chances are they’ve seen many things before). Simply because it is not going to be beneficial to deny the situation. Also, if a debt management plan is put into effect and something is left out, it may cause the credit counseling group to drop you from their program.
Also, be prepared to ask a lot of questions: When signing up with a credit counseling service, you do have to take the initiative to ask a lot of questions. Go with your instincts about any company, but take the time to ask a lot of questions. Any question that you have for any reason, they should be able to answer (or have the ability to find out).
These services are not always free: There may be a costs for these services. Be sure to make specific inquires about these fees.
You do sign an agreement with the credit counseling agency: Basically once you make an agreement you will sign an agreement. This may vary from agency to agency, but the basics always stay the same. There is one payment made a month to the agency, from there they will disburse the funds to your creditors. Basically, be sure to read what you are signing. Really go through and read everything. Simply because if you do not abide by the terms of that agreement, it is going to end.
Credit cards included will be closed: Even though it may seem obvious, the credit cards included in a debt management plan will be closed if they haven’t been already. If you decide to peruse this route, it may be to your benefit to contact your creditors to close the accounts directly (that may have less impact on your credit bureau than if a creditor closes a card when they receive a proposal).
Credit counseling does not necessarily fix your credit: When going through a credit counseling service, it usually isn’t the first choice that people have. Most of the time it is for people who have fallen really behind with their bills. It is not going to do miracles for a credit report, in fact there may be negative impact with past due payments, etc. If an account is charged off, paying it through CCCS will not change the status to “paying upon as agreed,” it will just start to satisfy the debt. This is something very important to take all of this into consideration. It may be beneficial to start paying off the debt and look into reestablishing credit in the future. Either way, this is something very important to think about.
Don’t expect miracles overnight: Some creditors are going to be willing to work with debt management plans more than others. If an account is in collections (through the company itself or with an outside agency), then the efforts may continue. This is something that you will want to let your counselor know about. Also, it is going to take some time to pay off the debts. In the end, though, being debt free is truly worth it.
Those are just a few things to take into consideration when any individual is considering going with a CCCS. There are a lot of reputable organizations out there, and there are a lot of scams. Always remember to do your research, ask questions and from there know the limitations of what the program can do for you. This may not be the answer for every single person in debt, but for many it will be the most beneficial thing.