Here is what you need to know if you’re considering credit counseling.
A consultation and an actual meeting with a credit counseling agent has no impact on your credit. However, before you set up a debt management plan (DMP) with a Credit Counseling Company, make sure that all of the due dates on the accounts you have set up on the DMP have a due date that works with the expected date the payment will be received by the Credit Counseling Agency. This way you make one payment to the credit counseling agency and the agency sends the payments to the creditors on your behalf before the due date.
If you don’t have the dates coordinated on DMP you will likely end up with late fees and penalties from your creditors. Worst of all, these late payments will show on your credit report and your credit score will be affected.
Keep in mind, when on a credit counseling plan, you are not supposed to apply for any additional credit. Also, a creditor may place a note on your credit report that you are on a credit counseling plan.
The benefit of working with reputable credit counseling agency is that they may have existing relationships with many creditors, which may get you reduced interest rates, while in a credit counseling program. But, please keep in mind that working with a credit counseling agency doesn’t guarantee lower interest.
When on a debt repayment plan you make one payment a month to credit counseling agency, the money then gets allocated between the creditors until the debt is paid off. Typically credit balances are paid off within 5 years (depending on the amount of debt).
When choosing between bankruptcy and credit counseling, it is in your best interest to know exactly what you’re getting yourself into in each case. First and foremost, meet with a credit counselor to go over your budget, expenses and see if it credit counseling is beneficial for you.
CreditFirm.net is NOT a credit/debt consolidation company, we are a Credit Repair Agency. For more information about our services, please visit our Services page.