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Credit Counseling Questions

Credit counseling is a service that provides people with options on how to become financially stable. Credit counseling offers solutions to the consumer on how to avoid drowning in debt. The goal of credit counseling is to educate the consumer on ways to recover from debt. The credit counseling company will work with creditors and create a Debt Management Plan that offers relief in the form of lower payments, late fees, and interest rates. The credit counseling company will build the debt management plan based off of the arrangements made with the creditors. Below are a few of the more commonly asked credit counseling questions that have been answered by Experts.

I have almost $50,000 in credit card debt and am considering a credit counseling service. Are these agencies trustworthy and what impact will using the service have on my future credit?

In many cases, credit counseling services provide debt solutions and can provide help with a person's credit situation. The amount of credit card debt that you have would be impossible to pay off on a payment plan. Usually, debt consolidation services set a person up on monthly payments and work toward an offer of a lump sum settlement. The settlement usually consists of 50-60% of the original debt. In your situation, you would probably be expected to pay $25,000 plus the cost of the debt service. That would literally take years to accomplish.

An option to consider is filing for bankruptcy if you have little or no assets to lose. Either way, your credit rating will suffer. However, if you choose to file for bankruptcy, you will avoid paying on an endless debt which will allow you to start over and work at building your credit score. Before you spend money on a credit counseling service, you may want to apply that money towards a consultation with a local bankruptcy attorney.

I currently pay $719 per month to a credit counseling service. My beginning debt was $30,000 and is now down to $7700. I cannot reach the credit counseling service. What should I do?

The first thing you should do is read the contract between the credit counseling service and yourself. Look for options that will allow you to terminate the service. You may be expected to pay cancellation fees or penalties for termination the service. There should be mention of these charges in the contract.

If the payments are electronically removed from your bank account, you will need to speak with the bank and find out how to stop the withdrawals. Before you stop the withdrawal, you should contact the companies that are receiving money from the agency. Try to negotiate a payment plan directly with the companies that you owe.

I owe $12,000 in credit card debt and was just given notice of a layoff. How should I approach the credit card company in order to protect my credit score of 800?

In order to protect your credit score, you can make the minimum payment to the credit card or use a credit counseling agency. If you use a credit counseling agency, they can negotiate a lower monthly payment and protect your credit score. Your credit score shouldn't be affected by using the credit counseling service. Your use of a credit counseling service will show up on your credit report however, once you begin making normal payments, that notice will be removed.

How can I have a judgment removed from my credit report? I used a credit counseling service to pay the debt off. The company was bought by another agency and there is no record of the debt.

The first thing you should do is contact the three credit reporting services and request a copy of your credit report. You can request a credit report from each agency once a year at no cost. In writing, you will have to dispute the judgment with each of the credit reporting services. When the agencies receive the dispute, they have to make contact with the company that placed the judgment against you. The company will have 30 days to respond to the credit reporting service. If the company doesn't respond, the reporting agency will have to remove the judgment from your credit report.

How does a debt management plan offered by a credit counseling company effect your credit?

Your credit is going to suffer if you use the debt management plan through the credit counseling company. The reason for this is because the credit counseling company requires that you stop making payments on your debt for 6 months. At the end of the six months the credit counseling company will approach your creditors with an offer to settle for 50% of the total debt. During the months you are not making payments, it will reflect on your credit score. In most cases it is better to file for bankruptcy and erase the debt.

Many people find themselves swimming in an ocean of debt and are unsure of where to turn for help. Credit counseling companies can offer the debt ridden person an option to lower the monthly payments while working towards clearing the debt. However, before you commit yourself to a credit counseling company, you should ask an Expert for legal insight.
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