Who Needs Credit Counseling?
Anyone who has already missed the payment date or the consumer
anticipating a possible hardship in near future can benefit from the
service. It is always advised to go to a counselor before any negative
item enters into credit report. So if you are still current with your
accounts and afraid of falling behind, immediately see a counselor to
find a suitable way out and protect your credit. Remember, once your
creditor takes you to court and wins a judgment, it will be reported as a
public record in your credit file and stay there for 7 to 10 years.
Before the debt goes beyond your capacity and compels you file
bankruptcy, go for credit counseling and stay creditworthy forever. Read
the warning signs that help you decide if you need credit counseling or
As far as FICO Score is concerned, it does not matter if you are enrolled
in credit counseling program or not. FICO scoring model does not count
this data. However, your creditors are likely to report your account as
under credit counseling or debt consolidation program. There are few
lenders that do not prefer credit counseling items on your report. But
Debt Consolidation Care Community says that the status definitely shows
your interest to pay your bills. So you are going to get privilege in
future. Moreover, new bankruptcy law in 2005 has made it mandatory to
undergo credit counseling session before filing bankruptcy.
Two types of agencies are there in the market – non-profit and those who
work against a nominal fee. Community members frequently ask the
question why an agency would work without a fee. The answer is simple:
the counseling agencies usually receive a particular portion of the fund
paid to the creditor, known as Fair Share.
However, there are few agencies that pretend to be non-profit, but keep a
part of consumers’ money with them. Beware of such companies. Ask these
questions to your counselor:
• Is there any monthly charge, set up charge or penalty for leaving
• Are these compulsory? A true non-profit firm should not incorporate
any mandatory fees.
Work with a reliable agency so that you can get the most out of the
It is pretty difficult to anticipate how long it will take to get you out
of debt. Several factors work behind it. Let’s look at an example: if
you pay $500 per month it will take 10 months to repay a $5000 loan in
full. But, if you decide to pay $250 per month, the repayment period is
likely to be doubled. Usually counselors design the program in such a
way that you can become debt free within 2 to 4 years.