The National Foundation for Credit Counseling (NFCC) is a non-profit organization that helps people consolidate their debts and avoid bankruptcy. Affiliation with NFCC guarantees working with a non-profit agency, but there is a dispute over how much it will hurt creditworthiness. It is recommended to evaluate multiple debt counseling agencies to find the best deal.
The National Foundation for Credit Counseling (NFCC) is an American institution that aimed to provide licensure, accreditation, and assistance to debt or credit counselors. It was mainly financed by credit agencies (credit card). In the wake of much higher credit spending in the 1970s and 1980s (which continues today), the NFCC helped steer people toward debt counselors. These counselors worked for non-profit agencies and would help borrowers consolidate their debts, especially if they owed to multiple credit cards, by reducing or stopping further interest and helping borrowers make a single payment each month, disbursed between your creditors.
The companies most associated with the NFCC were called Consumer Credit Counseling Services. In the 1990s, a large number of agencies not affiliated with the NFCC began to emerge. The worst of this charged huge fees for consumers trying to pay their bills, and the IRS eventually caught up with some of these agencies, revoking their non-profit status. Although there are some reputable rival credit counseling agencies, affiliation with the National Foundation for Credit Counseling tends to give consumers some reassurance that most of the money they spend on payments will go toward paying off their debt, not pay the salary of a debt counselor.
Since the National Foundation for Credit Counseling and its affiliated credit counseling agencies are primarily funded by larger lenders, some criticize it as simply a branch of the credit industry and not really interested in helping consumers. There is some question about the amount of bargaining that occurs in terms of reduced interest or payments if a business survives based on repaying a portion of that payment from lenders. While this criticism can occasionally be fair, even more so if the agency is not a nonprofit, many people have been helped by affiliates of the National Foundation for Credit Counseling and have been able to avoid bankruptcy, which tends to hurt credit ratings. for much longer. .
There is a major dispute over how much working with an NFCC affiliate to resolve debt will hurt creditworthiness. It’s not technically supposed to lower a credit score, and some lenders, banks, or homeowners may view successful debt repayment through a debt counseling agency as a positive effort on behalf of the borrower. However, this is not always the case.
Working with an affiliate of the National Foundation for Credit Counseling, or any debt counselor listed on your credit report, may make some people feel like they are low risk when it comes to renting a home, buying a home, or obtaining a loan to buy a car. You probably don’t use your credit cards anymore, and the ones offered to you if you’re in an NFFC credit counselor program can have extremely high annual and high fees, and very high interest.
If you are considering credit counseling, using an NFCC affiliate guarantees a few things. The organization you are working with will be a non-profit. This means that they may be limited in the fees they can charge you to help you pay off your debt. If you work with a non-NFCC affiliate, find a nonprofit agency and find out exactly how much of your monthly payment will go toward paying off your debt. Evaluate a couple of debt counseling agencies to find the best deal, the one that gives you the shortest debt repayment time, and also look for a reputable agency that has been in business for a while. It is not recommended that you use a for-profit credit counselor, as you will likely pay much higher fees and it will take much longer to pay off your debt.
No debt counselor is a miracle worker. Even a National Foundation for Credit Counseling affiliate company will require that you have sufficient funds to make your minimum monthly payment. About half of the people who work with affiliates can’t pay their debts, often because the monthly payment is higher than is affordable. When this is the case, bankruptcy is often your only recourse. Although it can hurt your credit rating, it can be worth it to be free of most debts, especially if your income has fallen below a level where you can afford to keep paying off those debts.
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