Credit Counseling
Our Credit Counselling Service Develops Credit Strategies Designed for Your Success
Are you just trying to make ends meet from one paycheck to another? Are you constantly being harassed by debt collectors whom you can’t pay? Do you have trouble figuring out how to budget your funds, let alone start a savings account? If you can answer yes to any of the above, it’s time that you start thinking about a credit counseling service.
There are a great many consumer credit counseling options available to you if you need debt help, many of which are non-profit and offer local office hours. There are also credit counseling options available by phone or online if you are unable to find a reputable credit counselor in your area. If you don’t want to find a credit counselor through an online search, your friends and family, local consumer protection agency, and your financial institution should all be able to give you some great recommendations for finding a financial counselor.
What is a Credit Counselor?
A good credit counseling organization will be able to help advise you on how to better manage your money and your debts, help you to create a budget that you can follow, and show you where to get free educational tools that can help you continue managing your credit on your own. The credit counselors at Credit Advisors Council are all certified and trained in areas of consumer credit, including money and debt management and budgeting. You’ll be able to talk with your credit counselor in depth about your personal financial status to create a personalized money and debt management plan that will help you to improve your financial standing. Your first credit counseling session will typically last about an hour, and you will be offered follow up sessions that you can choose to take if you feel credit counseling will benefit you.
Types of Credit Counseling
Credit Counseling is an umbrella term that actually covers several variations of debt management counseling. These include debt management counseling and pre-bankruptcy counseling.
Credit Counseling
Credit counseling is the most common form of credit counseling available. This form of counseling revolves around the type of debt that a majority of consumers face: credit card debt. Your counselor will speak with you on a personal level about your financial status and debts in order to better assist you in finding the right tools, informational materials, and services that you need to budget your money and pay off your outstanding credit card debts.
Debt Counseling
Generally, this is another term used for credit counseling. Debt Counseling will also cover your unsecured debt, including personal and financial institution loans. If you have borrowed money for a car or a home, you may be having trouble paying off your outstanding loans. If you have too much debts or simply are unable to pay your existing debts, your counsellor may recommend a debt management plan. This is a service in which you make regular monthly payments to your credit counseling company, who uses that money to pay off your creditors on a scheduled plan that your counselor will work to create with you. Your debt counselor will have spent a significant amount of time going over your financial status and helping you to create money management plans and goals before suggesting entering into a DMP.
Pre-Bankruptcy Counseling
If you are considering filing for bankruptcy, there are a number of mandated steps that you are going to need to take; one of which is speaking with a bankruptcy credit counselor. Bankruptcy credit counseling is relatively simple and a lot less intimidating than it may sound. Your counselor will review your debts and income for an extended period of time in order to determine if filing for bankruptcy is the right course of action for you. In many cases, debts can be resolved by an informal debt repayment plan or another alternative to bankruptcy. While you are required by law to seek pre-bankruptcy counseling before filing for bankruptcy, you are only required to submit the repayment plan that your counselor has created for you; you are not legally required to follow that plan.
Non-Profit Credit Counseling
If you are in need of minor credit counseling, or are simply unsure if credit counseling is for you, your best course of action is to find a nonprofit credit counseling agency. In some cases, a company that charges or strongly recommends a form of payment for their counseling services is a red flag. There are many nonprofit credit counseling solutions, and even free credit counseling options from credit repair agencies. Look to universities, military bases, credit unions, and branches of the US Cooperative Extension Service for nonprofit credit counseling solutions.
Credit Counseling Frequently Asked Questions:
Q: Do I Qualify for Credit Counseling?
A: Yes! Everyone qualifies for credit or debt counseling because it is a free service that you can undertake if you feel that it is beneficial to your financial state. You don’t even need to be in debt to work with a credit counselor.
Q: What should I expect from my credit counseling session?
A: Credit counseling is a discussion of your financial and credit status, so be prepared to talk at length about your income and debts. Your credit counselor will also help you to figure out your goals and what you feel is holding you back. All of this will go into creating a financial plan that helps you to meet those goals.
Q: How long does a credit counseling session take?
A: Your first credit counseling session will take about an hour minimum. If your credit counselor spends less time with you, consider finding another counselor to be sure that they are properly exploring your finances and giving you the best possible options.
Q: Do I need to bring anything to my session?
A: You don’t need to bring anything to your first debt counseling session if you don’t want to. However, it is helpful if you can bring copies of your most recent bills and bank statements so that your credit counselor can get a better idea of your financial standing.
Q: Is my counseling session private?
A: Counseling sessions are completely confidential, and no one needs to know you spoke with a counselor unless you wish to tell them. Be sure to ask your counselor about confidentiality to ensure that you are working with someone who follows proper privacy guidelines.
Q: Will this hurt my credit score?
A: Enrolling in credit counseling will not affect your credit score and will not be reported to your creditors. However, if you enroll in a debt management plan, creditors may choose to add a notation to your credit score, although this will not affect your overall score.
Q: How do I speak to a counselor? What if there is no credit counseling near me?
A: Your local credit counseling options may have different hours of operation. At CAC, you can speak to a credit counselor during our branch hours, or at any time via phone or email. It is up to you if you choose in person or over the phone counseling help.
Q: Is credit counseling a onetime thing?
A: Credit counseling is done by choice. If you feel that you have gotten all the information you need from a single session, you are not required to take any follow up sessions, although your credit counselor should recommend additional sessions.
Q: What should I expect to pay?
A: You shouldn’t expect to pay anything; not from your first session at least. Most credit counseling services are completely nonprofit. If a credit counselor recommends you pay for services or pushes a paid service on you during the first session, consider finding another counselor. Be aware that if a counselor recommends a debt management plan, you will need to pay for this service.
Q: What is a debt management plan?
A: A debt management plan is a payment plan involving you, your credit counseling agency, and your creditors. Through this plan, your creditors will agree to offer special concessions that will help you get out of debt. These concessions may include reducing interest rates or stopping late fees.
Q: What if my credit counselor recommends a Debt Management Plan?
A: Be sure that this is the plan for you. Your credit counselor shouldn’t immediately recommend a debt management program, nor should they try to push you into one or promise that it will be a quick fix to your debts. Your credit counselor should spend a fair amount of time reviewing your financial state and working with you on repayment options before recommending a debt management plan, if at all.
Q: What if I’m only a little behind on my bills?
A: You can still use a credit counseling service. In fact, catching a debt problem early can be a huge help in avoiding worsening your debt and credit report. Creditors will also respect that you have taken early remediation steps to fixing your debt, even if you are only a bit behind.
Q: Can I still use my credit cards or apply for new credit?
A: No. If you are working with a credit counselor, you are making the decision to work on getting out of debt. It is counterproductive to incur new debts while attempting to remove your existing debts. Additionally, if you enter into a debt management plan, your creditors may choose to close your existing accounts until payment has been made.
Common Terms and Definitions:
| Terms | Definitions |
|---|---|
| Credit Counseling Service | If you are in debt, a credit counseling service can assist you. Credit counseling services will help you to understand the major causes of your debt, where you can improve your budgeting, and what repayment plans are best for you. They will also give you free information and tools to help you manage your debt on your own. |
| Credit Counselor | A credit counselor is experienced and accredited. They work for credit counseling organizations and will work with you personally to repair your debt. |
| Consumer Credit Counseling Service | Consumer credit counseling services are generally nonprofit and help consumers to get the information and tools they need to budget, pay off their debts, and continue improving their financial health. |
| Debt Counseling | Another term for credit counseling, this service helps consumers to create a plan for repaying their debts. |
| Debt Help | A number of free and paid services that help consumers faced with credit card debt, unsecured debt, and more that they are unable to repay. |
| Non-Profit Credit Counseling | Free credit counseling that is available to any consumer. Nonprofit credit counseling services will not require or even request payment for their services, unless they recommend you enter into a paid debt management program. |
| Bankruptcy Credit Counseling | This type of credit counseling is mandatory if you are filing for bankruptcy. Bankruptcy credit counseling aims to help consumers find an alternative repayment plan for their debts, rather than filing for bankruptcy. |
| Debt Relief | The partial or complete forgiveness of your consumer debts. This can also be the slowing or stopping of new debt growth. |
| Credit Counseling Agency | A team of accredited credit counselors who aim to help educate consumers on debt management and repayment, as well as budgeting and positive credit growth. |
| Credit Analysis | This is how credit companies, credit unions, and your credit counselor will evaluate your ability to repay your debts. |
| Consumer Credit | Credit that you are given in advance for the purchase of goods and services. This can be loans or credit card accounts. |
| Credit Bureaus | An agency that gathers information about your credit rating, including your debts. Credit Bureaus are used to report this information to credit card agencies and financial institutions. |
| Credit History | This is your history of debt repayment. A credit history will include instances where you borrowed money or opened a credit account and your repayment of these accounts. |
| Credit Report | This is a detailed report of your credit history. Your credit report is used by financial institutions to determine your credit worthiness. |
| Credit Score | A credit score is the numerical summation of your credit files and credit history. |
| FICO Score | This is one type of credit score. Created by the Fair Isaac Corporation, the FICO score is used in conjunction with your credit history to determine if credit should be extended. |
| National Foundation for Credit Counseling (NFCC) | A nationwide organization of credit counseling agencies that provides accreditation for counselors and educational support. |
Relevant National Credit Counseling Laws, Rules or Regulations
The Telemarketing Sales Rule
Enforced by the Federal Trade Commission, this law requires that companies offering credit debt relief explain their fees and any service conditions up front, before a consumer signs up for their services. This rule also stops any credit counseling agencies that offer their services over the phone from charging a fee before they are able to reduce or settle your debts. If a credit consulting service promises that they can enter you into a debt management plan, this law prohibits them from collecting a fee from you before entering into the DMP and making at least one payment to your creditors under this service.
State Mandates
In many states, there are specific mandates that help to govern the best credit counseling agencies. In Florida, companies that provide debt help must carry a specific level of insurance against employee dishonesty, depositor’s forgery, and computer fraud.
Bankruptcy Counseling
If you are filing for bankruptcy, Federal Law requires that you seek credit counseling services. This means that you and a credit counselor will need to discuss your finances in depth and create actionable plans that provide you debt relief alternatives to filing for debt. While you are required to complete this counseling, and submit a certificate when filing for bankruptcy, you are not legally obligated to follow any alternative debt management plans that you come to with your counselor. If you do not complete bankruptcy counseling, your case will be dismissed.