Credit Counseling

There are plenty of credit counseling companies out there, and many offer their services through walk in locations, on the Internet, or via telephone calls. A reputable credit counseling program will help you negotiate favorable terms with your creditors, and may persuade them to reduce your interest rates and waive fees incurred for being over your credit limit or late with your payments. You make one monthly payment to your counseling firm, and they pay your creditors. Part of the agreement includes your agreement to stop using your credit cards, and you must also refrain from applying for any additional cards or lines of credit.


While many have benefitted from credit counseling companies, some have been accused of musing their non-profit tax status by not providing the required counseling and consumer education. Furthermore, this tax status does not offer any guarantee. Their services may not be free, affordable, or legitimate. It is important to remember that most charge upfront fees for their services, as well as monthly maintenance fees. It is therefore important for you to do some research in order to make sure that the company you select suits your needs. Check with local universities, financial institutions, or even friends and family members. If you’re in the military, check out your base.


Finally, be wary of any credit counseling organization that does any of the following:

  • Pressures you for voluntary donations. This is just a way of padding their income.
  • Does not disclose the possibly negative consequences using their program may have on your credit.
  • Refuses to send you any information before acquiring your financial information or account numbers.
  • Tries to enroll you in a debt management plan without reviewing your financial situation.
  • Offers to enroll you in a credit counseling program without providing the required budgeting and money management education.
  • Demands that you make a payment towards their program before your creditors have agreed to reduce your interest rates and payments.

As with any industry, there are always people out there willing to exploit people in order to put money in their own pockets. However, there are legitimate companies out there who can help you with your credit problems. Trust your instincts, and choose carefully.