Consumers that deal with credit card debt sometimes find it necessary to a get a little outside help. Consumer credit counseling agencies are a great, free resource for consumers needing a little extra help with budgeting, planning, or even setting up a debt repayment plan, otherwise known as a Debt Management Plan (DMP).
But you may be wondering if you really need help. Here are some warning signs to help you decide if it’s time to start investigating a non-profit consumer credit counseling agency.
- Your own efforts at working out a reasonable repayment plan have failed.
- Based on your current budget, it will take longer than five years to repay your credit card debt.
- Your total monthly debt payments, not including mortgage and car, equal 1/4 – 1/2 of your take-home pay.
- Your are unable to pay even the minimum amounts due on each credit card every month.
- You are consistently late with one or more regular bills other than credit cards, including utility and auto bills.
- Creditors and collection agencies frequently call you.
- You and your spouse fight about debt and financial issues.
- You don’t know if you can really afford to purchase something.
Know What to Look for in a Credit Counseling Agency
With the assortment of agencies trying to get your business it can be difficult to know which one is best. First things first, look for an agency that is non-profit and accredited with either the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.
It’s also a good idea to contact the local Better Business Bureau to see if any complaints have been filed against the company and how the issue was resolved. Similarly, checking our active credit forum for posts regarding the company is a good idea.
Finally, make sure they are licensed to offer services in your state and that they don’t require detailed information about your situation before sending free informational material about the services they offer.
2. Know What They Offer
A reputable credit counseling agency offers many wonderful services including assistance from a certified counselor who will help you create a personalized budget and possibly a debt management plan (DMP); working with creditors to lower or eliminate interest, finance charges, late payment penalties, and other types of fees; distributing payments to each of your creditors enrolled in your DMP; and, most importantly, giving you lots of free educational materials.
3. Know How They Will Help You
The first step a credible counselor will take is thoroughly analyzing your financial situation; plan for an hour long initial visit and several follow-up sessions. Then, based on what they see, they can set up a plan to help you both in the short-term and the long-term.
Sometimes long-term help involves a debt management plan (DMP), but not necessarily. If the agency won’t continue providing budget counseling unless you sign up for a DMP, look elsewhere.
Another warning sign to look elsewhere is the unrealistic promise of erasing your credit history. No one can erase your credit history. Under the Fair Credit Reporting Act, accurate information about your accounts stays on your report for up to seven years.
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Editor's Note: This article is the first in a two-part series containing consumer tips regarding credit counseling services. Please click here to read the second article in this series.
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