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Credit Counseling: Fact or Fiction?


Many people have turned to personal credit counseling to receive help with personal debt. However, not all credit counseling organizations are created equal. While there are some perfectly legitimate organizations that do provide counseling services to people, there are also fraudulent companies that do nothing more than pocket your money. Fortunately, if you know how to choose a reputable company, you can benefit from the services they provide.

Legitimate credit counseling companies work with lenders to get rid of late fees, extend the term on loans, or lower interest rates. They enable you to make comfortable payments while still working to pay off the debt. In addition, they provide budgeting and general money management advice to help prevent any future debt situations. If your debt situation is close to the point of bankruptcy, they will encourage you to make monthly payments to the agency ,and they will in turn disperse the funds to your creditors. This ensures your payments are on time and credited to your specific bills.

When choosing an agency, the first thing you want to look for is whether or not they are a member of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA). These are the largest and most respected networks of consumer credit counseling agencies, as they are put through a rigorous accreditation process.  Companies with this accreditation have been carefully reviewed in their operating procedures for the agency as a whole, as well as their effectiveness as counselors.

You can find a list of accredited counselors from the websites of the NFCC and the AICCCA. Once you have narrowed your search down to a couple of companies, the next step is to investigate the company on benefits and services. You can check your state's Attorney General's Office, a local consumer protection agency, or the Better Business Bureau. Each of these sources can provide the details of complaints filed against any of the companies you have selected, along with the outcome of the dispute.

Once you have finished researching the companies, it's time to call them and ask some questions. You want to make sure that you are fully prepared to ask all of the appropriate questions to help you make an informed decision. Because this process is most likely new, the Federal Trade Commission (FTC) has compiled a list of questions that you should ask the agencies. You can find the list at the FTC’s website under "Fiscal Fitness: Choosing a Credit Counselor".

You now have to decide whether or not to use the counseling agencies services. Theoretically, you can do the same services a counselor can do for you. You have the ability to negotiate with your creditors to get rid of late fees, extend loan terms, or reduce interest rates, but  sometimes you may not be as effective as a counselor.  If the reason you are in debt is due to poor money management and spending problems, then you may not have the discipline necessary to take care of the credit issue yourself. In that case, having an experienced professional handle your credit negotiations for you may be more to your benefit.

It is always a good idea to check with your creditors to make sure that your payments were made and that everything is in order.  Take responsibility for your credit and be involved!


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