The National Foundation for Credit Counseling (NFCC) helped direct people to non-profit debt counselors in the 1970s and 1980s. Affiliation with the NFCC gives consumers assurance that their money will be directed towards paying off their debt. However, some criticize the NFCC as an offshoot of the credit industry. Working with an NFCC affiliate shows up on your credit report and might make some people feel like you’re a poor risk. It is recommended to use a non-profit agency and evaluate a couple of debt counseling agencies to find the best deal. No debt counselor works miracles, and bankruptcy may be the only recourse for some.
The National Foundation for Credit Counseling (NFCC) is an American institution that aimed to provide licensing, accreditation and assistance to debt or credit counselors. It was mainly financed by lending agencies (credit cards). In the wake of much higher credit spending in the 1970s and 1980s (which continues today), the NFCC helped direct people to debt counselors. These advisors worked for non-profit agencies and helped borrowers consolidate their debts, especially if they owed multiple credit cards, by lowering or withholding further interest and helping borrowers make a single payment each month, which would be disbursed between their creditors.
The companies most associated with the NFCC were called Consumer Credit Counseling Services. In the 1990s, a huge number of agencies not affiliated with the NFCC began to spring up. The worst of these charge huge fees for consumers trying to repay their bills, and the IRS eventually caught up with some of these agencies, revoking their nonprofit status. While there are some rival credit counseling agencies that are very reputable, affiliation with the National Foundation for Credit Counseling tends to give the consumer some assurance that the majority of the money they spend on payments will be directed towards paying off their debt. , not to pay a debt counselor’s salary.
Since the National Foundation for Credit Counseling and its affiliated credit counseling agencies are primarily funded by larger lenders, some criticize it as simply an offshoot of the credit industry and not really interested in helping consumers. There is some question as to how much negotiation occurs in terms of lowering interest or payments if a business survives on the basis that lenders return a portion of that payment. While this criticism may occasionally be fair, even more so if the agency is not a non-profit, many people have been helped by affiliates of the National Foundation for Credit Counseling and have been able to avoid bankruptcy, which tends to ruin your credit rating for much longer.
There is significant dispute over how much working with an NFCC affiliate to resolve debt will hurt creditworthiness. It technically shouldn’t lower your credit score, and some lenders, banks, or landlords may view successfully repaying your debt through a debt counseling agency as a positive effort on behalf of the borrower. However, that’s not always the case.
Working with a National Foundation for Credit Counseling affiliate or any debt counselor shows up on your credit report and might make some people feel like you’re a poor risk when it comes to trying to rent a home, buy a home, or get a loan. loan to buy a car. You’re unlikely to be able to use your own credit cards anymore, and those offered to you if you’re in an NFFC credit counselor’s program may have extremely high annual and setup fees and very high interest.
If you’re considering credit counseling, using an NFCC affiliate guarantees a few things. The organization you are working with will not be for profit. This means that it may be limited to the fees it can charge you to help you pay off your debt. If you work with a non-NFCC affiliate, research a non-profit agency and find out exactly how much of your monthly payment will go towards repaying your debt. Evaluate a couple of debt counseling agencies to find the best deal, the one that offers you the shortest debt repayment period, and also look for a reputable agency that has been in business for some time. Using a credit counselor for profit is not recommended, as you are likely to pay much higher fees and it may take much longer to finish paying off your debt.
No debt counselor works miracles. A firm affiliated with the National Foundation for Credit Counseling will also require that you have sufficient funds to make the minimum monthly payment. About half of people who work with affiliates are unable to pay off their debt, often because the monthly payment is more than affordable. When this is the case, bankruptcy is often your only recourse. While it can hurt your credit rating, it can be helpful to be free of most debt, especially if your income has fallen below a level where you can afford to continue paying those debts.
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