Best Credit Counseling Companies
How can you differentiate one of the best credit counseling companies from a scam?
Quite simply one of the top credit counseling companies will take their time with you to understand your situation and educate you on your debt relief options, whereas scams tend to focus almost exclusively on enrolling you into their debt management plan. Good credit counseling agencies will also charge reasonable fees for enrolling in their service – no more than $50 as a set up fee and then $35 per month are typical. Many of the bad companies you hear about charge as much as the entire first payment as an enrollment fee and then up to $50 per month.How does the credit counseling process actually work?
Credit counseling companies help consumers simplify their lives by allowing them to make one monthly payment to the agency instead of juggling several monthly payments to various creditors. Once the agency receives your payment, it will be dispersed to your creditors based on the amount they agreed to during the negotiation process. Most consumers who use a credit counseling agency can reduce their monthly payments and interest rate, which lowers their overall debt.
The average amount of time for a consumer to remain in a debt management program is between four and five years. In addition to providing a debt management programs, many of the best credit counseling agencies can also help you establish and maintain a realistic budget.
How would I get the process started?
The first thing you need to do is contact a credit counseling service and talk to a debt counselor. He or she will go over your list of unsecured debts and weigh them against your income to come up with a proposed monthly payment amount. The next step is for your assigned counselor to contact your creditors in an attempt to negotiate lower payments and interest amounts. Creditor participation is voluntary. After all creditors have been contacted, you will begin sending your monthly debt payment to the agency.
Does it cost me anything to participate?
Yes, although the amount will vary depending on several factors, including the credit counseling service that you choose, the state you live in and your total amount of debt. The reason your fee can differ by your state of residence is that several states have legislation limiting the fee that credit counseling agencies can charge. An average set-up fee is approximately $50, while average monthly fees are around $35. Of course, this can vary considerably depending on whether you are using one of the best credit counseling companies or one of the worst.
Are all credit counseling agencies non-profit?
No. Some that were set up that way originally have lost their non-profit status after IRS audits proved they were driven by profit after all. Even if an agency is non-profit, it must still cover its own costs to maintain the program.
How will this affect my credit?
If you are behind on your bills, it will have a positive effect by showing that you are now paying on them. On the other hand, if you were not yet behind on your bills, being enrolled in a credit counseling service could have a slightly negative impact on your credit.