Credit Counseling

What is Consumer Credit Counseling?

Consumer credit counseling is a debt assistance option for consumers with financial difficulties who are unable to handle the minimum payments on their debts any longer.  They usually have numerous credit card accounts, and may be seeking debt relief as well as credit card debt counseling. They are typically up-to-date on their monthly payments and need a way to get ahead of the payments.

Debt counselors act as an intermediary between you and your creditors. They will work with your creditors to have your interest rate and fees lowered. Your payments will also be adjusted so that you can repay the debt over time, usually up to five years. In return for having your rate adjusted and perhaps some fees reduced or removed, you will pay the consumer credit counseling company to manage this, for that entire period of time. This will not reduce your debt, but might help to make payments manageable.

There are for-profit as well as non-profit credit counseling companies. There have been some consumer credit counseling agencies which have gotten bad press due to illicit activity. The non-profit status has tricked many a person into believing they are a consumer service, and they are not. Credit counseling is a business and the profit is going somewhere! In fact, the non-profit sector organizations are often funded by the credit card companies to whom you are making the payments!

So, you should know in advance that a credit counseling company will try to get as much from a consumer as they can. This means you will probably wind up paying much more than is necessary. However, if you have the ability to continue making payments over a period of time, and wish to repay back the full balance, this would be the choice for you.

Despite the fact that you have paid back your debt, this will show up on your credit report, as TAP, or third party assistance. This could be viewed unfavorably by anyone checking your credit report.

If you are thinking about going this route, read up more on credit card debt counseling.