Are You Ready For Credit Counseling?

by Craig Peters, Contributing Writer   

If you feel that your personal finances have spiraled out of control, you may have reached the point where you need more than the casual financial advice of friends and family. You might want to consider professional credit counseling.

A 2007 George Washington University study on credit counseling reported that approximately nine million Americans sought credit counseling services in 2003.¹ If you're thinking about becoming one of the millions who seek credit counseling this year, it's time to take a look at some basic questions:

When should I think about getting credit counseling?

You're probably a good candidate for credit counseling if you can't make the minimum payments on your credit cards, if you have several credit cards maxed out, if you're consistently late in paying your regular bills, and if you're being hounded by collection agencies.

What can credit counseling do for me?

A counseling service can make it easier for you to meet your monthly debt obligations by negotiating lower payments with your creditors. You can also obtain ongoing financial education that will help you stabilize your personal finances and become a more educated credit consumer.

How do I avoid making the mistake of choosing a bad credit counselor?

Make sure the credit counseling firm is properly accredited. Any legitimate credit counseling firm will be affiliated with one of two main agencies: the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. You should also check with your local Better Business Bureau.

Will working with a credit counselor improve my credit score?

In some cases it may, but in others it won't have any effect at all. If your financial alternatives are credit counseling or bankruptcy, though, your long-term credit picture will certainly be better as the result of credit counseling.

You may have made a series of money management errors that led you into a bad financial situation, but realizing the need for credit counseling could be a step in the right direction. Needing a credit counselor and not getting one, though, is probably a mistake you simply can't afford.

Footnotes
¹ "The Impact of Credit Counseling on Subsequent Borrower Behavior," Gregory Elliehausen, E. Christopher Lundquist, and Michael E. Staten, George Washington University School of Business