"Credit Counseling"

Let a Consumer Credit Counseling Agency deal with your creditors and design a way to pay off your debts faster.

These debt management agencies are non-profit companies that provide several different types of services:

• Debt consolidation plans - provides a plan that consolidates your payments to unsecured creditors into one lump sum payment. You make a single monthly payment to the agency, and they distribute the money to your creditors.

  Credit Counselling Agencies won't help you with your secured debts (such as home or car loans). However, they will work with the unsecured creditors to get you discounts on fees and interest rates.

• Budget counseling - the better credit counseling agencies offer classes and counseling sessions to help you improve your money management skills.

  Credit counseling works best for people with a steady income and unsecured debt. But remember, a counseling agency can't really do anything to manage your debt that you can't do for yourself if you take the initiative.

• More information on Personal Budgeting ... personal financial management and Budgeting.

Advantages :

• The convenience of one payment for all unsecured debt.

• Possible discounts on interest rates and late fees.

• Structured payment plan forces you to make regular payments.

• Helps you negotiate with creditors.

• Stops calls and harassment from creditors.

• Possible substantial reduction in total amount owing.

Disadvantages :

• Doesn't cover secured debts like home loans, auto loans.

• Agency fees can be $250 and up.

• Agency scams and improprieties.

• You will have to give back your credit cards and not apply for any new ones during your plan. Sometimes, you can get a secured credit card after a year or so, if it is needed.

Many credit counseling organizations provide valuable advice, education and assistance, but consumers need to be wary of the quick fixes offered by some organizations. Consumers can help protect themselves from deceptive credit counseling practices by knowing how to choose a credit counselor.

If you are having a difficult time repaying your debts, a counseling agency may be able to work out a Debt Management Plan for you. They can negotiate special programs with creditors that are not available to the general public.

Choosing an honest reputable company can be one of the most important personal finance decisions of your life.

Where do you start ?

Look in your yellow pages under Credit Counseling or Bankruptcy Trustees. Preferably pick the ad that is the biggest, since they are likely very experienced and successful.

Phone them and make an appointment. Prepare some questions before you go. Don't sign anything with them until you are sure you know what you are getting into and you know for sure what the fees are.

At least for comparison purposes, contact some agencies online too and see what they can do for you.

Some of the larger organizations are :

1. Care One Credit Counseling.

2. National Foundation for Credit Counseling.

Use the following as a guideline to help you choose wisely :

• A certified counselor will do your budget, including your expenses and income.

• They will figure out the total amount of debt you owe and arrive at a figure you can pay each month toward that debt while satisfying your creditors' requirements.

• Once all parties agree on the monthly amount required to liquidate your debts, you send that amount to the counseling agency each month. They distribute the funds to your creditors, who have agreed to accept a lower interest rate (and perhaps a lower monthly payment).

• The greatest savings you will see by using a credit counseling agency is that they can get creditors to lower or eliminate interest as well as other finance charges, late payments, and penalties.

• Ask specific questions concerning repayment plans, such as what happens if repayment is more than you can afford and how secure is the information they provide.

• Since most nonprofit counseling agencies have to charge a start-up and monthly maintenance fee, find out up front what the cost will be and make sure they put it in writing. Carefully read through any written agreement that an organization offers. It should describe the services to be performed; the payment terms for these services, how long it may take to achieve results; any guarantees offered; and the organization's business name and address.

• When selecting an agency, check with the Better Business Bureau to find out if consumers have filed complaints about the provider you are considering. Most importantly, find out if the issues have been resolved.

• Make sure to use a non-profit organization. This does not insure that the organization will do a good job, but along with reasonable fees and educational material, it is a good indication of a reliable organization. A good place to start is the Association of Independent Consumer Credit Counseling Agencies, www.AICCCA.org.

• Remember that credit counseling agencies cannot erase your credit history. If an agency claims to be able to do so, do not work with them. Under the Fair Credit Reporting Act, accurate information about your accounts can stay on your credit report for up to seven years.

• Find out what other sources of funding they receive, who regulates and audits their operation, if they are certified by the International Standard of Operations (ISO compliant), if their counselors are certified and by which association, and if there is a formal written agreement.

• Ask if you will continue to receive statements from your creditors showing what interest rates you are paying and the reduction of your debt each month.

• Follow up with creditors regularly to make sure your debt is being paid off.

Credit Counseling Agency Example :

Credit Counseling Agencies (CCAs) who provide the Care One brand of debt management services are reportedly known to offer very good service.

To ensure excellent service, CCAs must now meet an expanded set of standards in order to offer the CareOne brand. These new standards, developed in collaboration with the CCAs who provide the CareOne service, are designed to ensure that every client is treated with compassion and understanding.

The expanded CareOne standards mean that credit counseling agencies who offer the CareOne service must:

• Provide patient, personalized financial counseling and education to every client who seeks assistance, including an individualized assessment of the client’s financial situation in order to identify and help implement the best alternative to address his or her needs.

• Offer each client an opportunity to receive a personalized budget worksheet based on information the client chooses to provide to the credit counseling agency, together with budgeting tips, whether or not the client qualified for or chooses to enroll in a debt management plan.

• Devote at least 1,000 hours per year to community outreach activities that address consumer credit and money management.

• Partner with an educational institution to advance educational offering and to promote general consumer financial awareness, education, and literacy.

• Serve all clients who seek assistance, regardless of ability to pay, creditors owed, amount owed or enrollment in a debt management plan.

• Comply with the membership standards of either of two independent organizations---Association of Independent Consumer Credit Counseling Agencies (AICCCA) or National Foundation for Credit Counseling (NFCC).

CCA's offering the Care One Service are proud members of AICCCA.

The Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services.

The Association fulfills its mission by establishing a consensus among consumer professionals regarding service standards and professional industry conduct, as well as by establishing and maintaining strong relationships with credit management professionals and consumers.