Credit repair what is consumer credit counseling

Posted: 02/09/2007--25/11/2008 || Rate this Article: 3 || Views|| Sign In || Register ||Hello Guest

Bankruptcies are on the rise, and consumer credit card debt is at an all-time high. It doesnt take much to sink an already vulnerable financial ship, and many Americans are only one paycheck away from financial ruin. A sudden injury, job loss, or unexpected major expense can be the catalyst for financial stress. Paying bills with credit cards or borrowing money against collateral only prolongs the inevitable. Eventually, creditors are going to want their money. Many people see bankruptcy as the only solution to constant harassment by creditors, but there is another solution, and that is, consumer credit counseling.

Up until the mid 1960s, most Americans only used credit to buy a home or automobile. Some stores offered credit for televisions or appliances, but, for the most part, people paid cash for routine items. If you didnt have the cash, you didnt buy the item. Credit cards were introduced in the 1950s, but were generally only used by people who traveled for business. As more companies began to issue credit cards to the general public, people began to use them, first as a matter of convenience, and then to buy items that had been previously out of reach. Banks continued to add enhancements to these cards, and, with the introduction of the ATM in the early 1980s, consumers became increasingly more dependent on their credit (and debit) cards.

With such easy access to credit, it is no wonder that some people quickly dug themselves into a financial hole from which escape seemed impossible. For many of these people, bankruptcy seemed the only answer. But bankruptcy should only be entered into as a last resort, and after all other options have been attempted. Unfortunately, many consumers have no idea how to exercise these options themselves, and this need gave rise to the idea of an agency that would help them to do just that. The first non-profit consumer credit counseling agencies were founded in the mid 1960s to serve the need that was already apparent. Today, these agencies are operating in nearly every city and town in the United States, and are still free of charge. Additionally, many similar agencies have been established that offer the same services but for a fee.

The main objective of any consumer credit counseling agency is to work with a consumer to create a financial plan that will enable the consumer to repay his or her debts, thus avoiding bankruptcy. The consumer works with a counselor who will contact all of the consumers creditors and attempt to set up new minimum payments. The counselor may also be able to negotiate lower interest rates, eliminate finance charges, and even lower payoff amounts. The non-profit agencies do not charge a fee for their services, but instead receive compensation from creditors in the form of commissions on monies successfully collected. This motivates the counselor to work more aggressively to help make it easier for a consumer to pay off his or her bills.

Most consumer credit counseling agencies require the consumer to pay a lump sum amount each month from which the agency will pay the various creditors. The benefit to consumers is that they only have to write one check per month, and, as a result, all of their bills will be paid. Additionally, once the account has been placed in the hands of the consumer credit counseling agency, bill collectors will no longer need to contact the debtor.

Once a consumer has paid off his or her debt, it is important that an action plan be established that will prevent this situation from recurring and put the consumer on the road to credit repair. To this end, consumer credit counselors work with the consumer in an attempt to teach financial planning, budgeting, investing, saving, credit card pitfalls and other necessary skills. The ultimate goal is long-term financial stability.

If you are interested in using this resource as a possible solution to your financial situation, make sure that you do some research prior to selecting an agency with which to work. Check that the agency is a non-profit organization. Steer clear of any company that either charges an up-front fee or a percentage of your payments. Some agencies hide payment terms within the contract. Before you sign anything, READ it. Remember, you are going to be giving these people a healthy check each month. You cannot afford to be swindled by a less than reputable agency. Check with your local Better Business Bureau before making any commitments and never give out personal information to anyone over the phone or online. Make sure the agency is bonded in your state and has proper licensing.

Once you have begun a payment plan, make sure to continue to check your monthly statements to ensure that the agency is paying each bill and that your balance reflects this payment. Even though the agency is now paying the bill, you are still ultimately responsible for it. If the agency is not paying, do not hesitate to contact the proper authorities and sever your relationship with the agency immediately.

Consumer credit counseling is not the solution for everyone. Some people simply do not have adequate income to make the payments, or have such excessive liabilities that bankruptcy is the only alternative. A legitimate consumer credit counselor will tell you right up front if he or she cannot help you. For many people, however, this resource can mean the difference between walking the bankruptcy plank and having a healthy financial future. It is certainly something to consider, no matter what the situation. You have nothing to lose and everything to gain!