If you are knee deep in debt and unable to pay your bills, credit counseling can be a financial lifesaver. A credit counseling agency may arrange a debt repayment plan, a creditor-approved arrangement that allows you to repay your unsecured debts at reduced interest rates. In these plans, you deposit money each month with the counseling agency. Your deposits are used to pay your creditors according to a payment schedule the counselor develops with you. Some credit counseling agencies charge little or nothing for managing the plan; others charge a significant fee over time. Ask up front what the cost will be.
As part of the repayment plan, you may have to agree not to apply for, or use, any additional credit while you are participating in the program. A successful plan requires you to make regular, timely payments, and could take 48 months or longer to complete.
A debt repayment plan does not erase your credit history. Under the Fair Credit Reporting Act, accurate information about your accounts can stay on your credit report for up to seven years. In fact, creditors may report an account in financial counseling as payments missed, or that there are write-offs. But, a demonstrated pattern of timely payments should help you qualify for credit in the future.
If you want to work with a credit counseling agency, check them out with your Better Business Bureau. Also check with the National Foundation for Credit Counseling (www.nfcc.org); they accredit credit counseling agencies based upon rigorous standards. Any reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If not, consider that a red flag and go elsewhere for help.
Before you select a credit counseling agency ask for information on the following:
Kelvin Collins is president/CEO of the Better Business Bureau of Central Georgia & the CSRA, Inc. serving 41 counties in Central Georgia and the Central Savannah River Area (CSRA). This tips column is provided through the local BBB and the Council of Better Business Bureaus. Questions or complaints about a specific company or charity should be referred directly to the BBB at Phone: 1-800-763-4222, Web site: www.bbb.org or E-mail: email@example.com or firstname.lastname@example.org.