Are you falling behind on your monthly bill payments? Consumer credit counseling might be a workable answer for your financial troubles. With credit counseling, you work together with a counselor to decide how much you can actually afford to pay on your bills each month. Your counselor then contacts your creditors to work out a debt management plan that fits with your ability to pay. An advantage to this is that the new payment schedule will often include a lower interest rate, therefore lowering your minimum monthly payment.
Working with a credit counselor under a debt management plan can make your monthly bills easier to pay. In most cases, you will send your payments to your credit counselor rather than to each of your creditors. Your counselor will then be responsible for paying your creditors each month. Keep in mind that even when you're on a debt management plan, it is smart to watch your credit card accounts to ensure your payments are being applied correctly.
Another important point to watch how your credit accounts are reported on your credit report. Even though you're making your payments on time each month, you aren't necessarily paying as you originally agreed. This can have a negative impact your credit score. Additionally, some creditors include comments on your report that indicate you are in a debt management program.
Credit counseling is similar to bankruptcy in the way it affects your ability to obtain new loans. These effects will last as long as you are on a debt management plan and even for an additional few years while you rebuild your credit history.
You should also be aware that as long as you are on a debt management program you will not be able to use your credit cards. It will also be very difficult, perhaps even impossible, to obtain new credit during this time. Being unable to use credit isn't a negative thing, though. You will find it much easier to get out of debt when you aren't constantly acrueing more. This is the perfect opportunity to learn to better manage your finances so that once you begin to use credit again you'll have better money managing skills and will stay out of debt.
Even though credit counseling has some disadvantages, you shouldn't disqualify it as way to get out of debt. If you are having trouble managing your payments and you are in danger of falling behind on your bills, or are already behind, then credit counseling can keep your score from being too badly damaged.
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