Credit counselors can assist in negotiating lower interest rates with credit card companies in addition to guiding clients through important steps in building better credit ratings, regaining financial control, consolidating debt and making pre-existing debt obligations more manageable.
Choosing the right credit counselor and deciding if one needs credit counseling might best be considered in advance with care. A credit counselor should be able to perform specific tasks related to credit repair in accordance with ethical standards. To locate a government approved credit counseling service this U.S. Department of Justice credit counselor locator can be used.
When credit counseling may be useful
While not everyone needs a credit counselor, in some cases when debt is unmanageable, the services a credit counselor can offer may be useful. When seeking out credit counseling services, a few upfront questions may help determine if they are the right service for a clients debt management needs.
• Negotiation of lower interest rates: If a credit counseling company or representative cannot offer to negotiate better terms for credit card interest, they may not be performing all the functions credit counselors are assumed to be capable of.
• Debt Consolidation: Consolidating debt may involve finding a creditor willing to take on a lump sum loan for more reasonable payment terms for their own profit and as part of a credit counseling program. If a credit counseling service can offer debt consolidation assistance, they might be a good choice.
• Avoid Bankruptcy: Bankruptcy stays on credit records for several years and can damage one's credit report to the point new creditors for car loans, mortgages and other loans may thing twice before offering loans. Credit counseling is designed to take steps that avoid client bankruptcy.
• Improve credit score: Another use of credit counseling is to help improve credit score. Building credit can be a straightforward matter i.e. pay bills on time, don't have too much debt etc. However, credit counseling services may have additional ways and suggestions as to how to increase credit scores faster and more efficiently.
What to look for and where to find credit counseling
Locating a suitable credit counseling involves searching in the right places, asking the right questions such as those pertaining to the above financial issues in addition to questions that ascertain the organizations legality, cost, ability and know how. A few important questions and concerns are the following:
• Cost: A credit counseling service is there to help one get out of debt, not further into debt. Fees should be reasonable and fair. Some organizations may offer sliding scale services but anything over $50-100/month can be on the high side.
• Legality: There may be class action law suits, or formal complaints against the credit counseling business. The company should honestly state if such law suits are pending especially if the phone calls are recorded. If not, the Federal Trade Commission or Better Business Bureau may be off assistance in this matter.
• Terms of Service: If the service can't offer to do anything with certainty, they may not be worth considering especially if one is paying over $50/month for the assistance. The terms of service and/or customer agreement should clearly state what functions the credit counseling service provides.
• Licensing and Professional Endorsements: The more credentials an organization has the better. Such qualifications can include certifications from the Better Business Bureau, operating licenses and endorsements from reputable and/or creditable financial institutions.
There are many credit counseling services available to consumers. Finding the right one first involves narrowing one's search down to locality. A service that has a physical location in one's city or within driving distance is a good place to start as this gives one the opportunity to investigate the company first hand and be able to tackle issues in person with a person rather than just a voice on the phone. A few places one might consider inquiring about credit counseling are illustrated below:
• Local Financial Institution or Bank: A good place to ask is one's own bank or credit union. Banks may be aware of the more reliable and credible services and may be able to offer friendly and helpful advice themselves.
• Non-Profit Credit Counseling: When a company offering credit counseling is not-for profit, there motivation generally isn't greed by virtue of their corporate status. For this reason, they may offer sliding scale and/or lower fees than for profit services.
• Consumer Interest Organizations: As mentioned above, The Federal Trade Commission can be of assistance in researching a credit counselors credibility. They may also be helpful in locating a reputable service in one's area in addition to the Better Business Bureau. The websites for both these organizations are listed at the bottom of this article.
In summary, credit counseling services should ideally be useful in the above mentioned ways, affordable, credible and local. One's finances are an important part of daily life and regaining financial control and avoiding bankruptcy involve some significant financial steps. Credit counseling services that are able to meet most if not all the parameters laid forth in this article can assist with these financial concerns.
Sources:
1. http://www.ftc.gov (Federal Trade Commission)
2. http://www.us.bbb.org (Better Business Bureau)
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