Credit Counseling 101

So many Americans are up to their eyeballs in debt these days, there is no shortage of counseling services available. How can you find a reputable credit counseling service that won't send you right back to the bank? Or worse yet take you to the cleaners?

Look for the seal. The National Foundation for Credit Counseling, known in many cases as Consumer Credit Counseling Service, is the largest and oldest national non-profit credit counseling network. It sets national accreditation standards for credit counselors, and designs policies that ensure free or low-cost confidential services.

There are also for-profit credit and debt management programs out there, but often they charge a fee to participate.


    * What is credit and debt counseling?


      Counseling sessions — either by phone or in person — can provide education, hope and relief. When you sign up with a counseling service, the service will work with your creditors to either reduce or eliminate your credit card interest rate — something you would not be able to do on your own.

      At your initial counseling session, a counselor will go over your budget with you, looking particularly at your relationship between spending and saving. The counselor will work with you on a feasible payment plan to pay off your debts.

      These counseling centers also offer education sessions on budgeting, money managing, home planning, etc. — value-added services that can save you from traveling down the same road again as you work to get out of debt.


    * Counseling and your credit report


      While many credit and debt counseling services do not necessarily report your participation to credit bureaus, if you already have late or missed credit card payments, this information is most likely already on your credit report.

      Working with a debt management program is likely to improve your record because you will be making consistent, timely payments. However, if you currently have perfect credit, be forewarned that using a service may put a blemish on your report.

      The good news is that it only shows up on your credit report while you are enrolled, unless you declare bankruptcy, which remains on a credit report for up to 10 years. So before you have to go that route, swallow your pride and get out of debt for good.


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