Consumer credit counseling services can benefit if you're drowning in debt and can't keep up with your payments. These services can help you to work out a manageable budget, while acting as a friendly contact with your creditors. In fact, many creditors will sometimes lower interest rates and minimum payments when you are enrolled with such a service.
Credit counseling services usually deal with revolving credit, and most plans don't cover auto loans or home mortgages. These expenses can be figured into your monthly proposed budget, but you will be responsible for making sure that they are paid on time. You are also responsible for paying any other debts which aren't included in your payment plan.
When you sign up with a counseling service, you are often required to close out existing credit accounts, and also agree not to apply for any new credit. This is a good provision, as it helps prevent you from getting even further into debt.
When you set up a debt repayment plan, you deposit money with the counseling service each month. They, in turn, distribute this money to your individual creditors according to the agreements that they have made with each creditor. Once your repayment plan is set up, you should still check your statements each month to insure that the payment has been credited to your account. Also check your statements to verify that the terms of the repayment agreement are reflected. These might include lower interest, waived late fees, or other finance charges. Since you are the one who is ultimately responsible for your credit, you need to verify everything.
One important thing to understand is that debt repayment takes time. Ask your counseling service for an estimate of how long the repayment plan will take to complete. Also be aware that your participation in a consumer credit counseling program may show up on your credit file. Creditors may report that your account is in financial counseling. Ultimately, this may be better than an ongoing record of delinquent or missed payments, "charge-offs", or debts sent to collection. Creditors viewing your credit history can see that you have at least made an honest effort to repay your debts.
If you think credit counseling is a good option for you, make sure you choose a reputable company to work with. A good one to check out is moneymanagement.org. They are a nonprofit business that has been helping people get control of their finances since 1958 and have many locations across the US. If you live in Canada, you can visit the Credit Counseling Society.
While consumer credit counseling is very beneficial, you can also use the information in the following sections to help you stabilize your situation.