What’s consumer credit counseling?

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Consumer credit counseling is a consultation service that allows people in debt to obtain financial advice from debt management experts. A credit counselor typically assesses an indebted individual’s financial situation and educates them on possible options to improve that situation. Seeking consumer credit counseling should not significantly affect one’s credit history, although it may discourage individual lenders from extending credit. Before hiring the services of a consumer credit counseling company, the person in debt should make sure that the company is legitimate.

Debt from credit cards, car loans, mortgages, student loans, and other potential sources can sometimes accumulate to a level that is difficult to manage. Consumer Credit Counseling is a consultation service that provides financial advice to those with unmanageable levels of debt. By working with a debt management expert, an indebted individual can create a plan to address their debt.

Generally, consumer credit counseling begins with an introductory session in which the indebted individual presents documents such as creditor statements and proof of income to their debt counselor. The debt counselor analyzes these documents to fully understand the financial situation of the indebted individual. Based on that financial situation, the counselor educates the indebted individual on possible options to manage their debt.

In cases where the indebted individual may be managing their debt alone, they may only need a single consumer credit counseling session, during which your counselor will help you set a budget and debt repayment goals. If the individual has a very high level of debt compared to his income, he may need to take more drastic measures to become debt free. Your credit counselor may recommend filing for bankruptcy or creating a debt management plan (DMP). In a DMP, a credit counseling agency takes over the management of an individual’s debts, sometimes negotiating with creditors to secure reduced payments or lower interest rates. Instead of paying their creditors individually, the indebted individual makes a single monthly payment to their credit counseling agency.

Many people worry that seeking consumer credit counseling will hurt their credit history. While the fact that one has sought advice will usually show up on their credit report for several years, in most countries it does not directly affect credit scores. However, it should be noted that individual lenders may choose to deny a credit application to those who have sought credit counseling in the past.

Before engaging the services of a consumer credit counseling company, it is important to make sure that the counseling company is legitimate. In most countries, legitimate companies provide their services for free or only charge a small fee. Many countries have national debt management agencies. Legitimate advisory firms are usually registered with your country’s debt management agency.

Smart Asset.

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