Although many measures can be taken by individuals to improve their credit score, renegotiate the terms of their existing debts, and otherwise improve their credit situation, not everyone is capable of doing this themselves. Some people lack either the time or the patience to do this and many others simply lack the knowledge to do so. This is where a credit counseling service can come be helpful.
It is common for people to wait until they are already in financial trouble, once they are least able to afford an additional expense, before seeking counseling. This is generally a bad idea. As soon as an individual realizes that their current debt load may be too much, they should immediately begin the process. Many people wait until they are already missing payments, defaulting on loans, and being harassed by collection agents, but by this time many of the potential options have closed.
Preemptively taking advantage of credit counseling may allow for more – and perhaps better – options to adjust the debt load before the situation becomes too dire.
A credit counseling service looks at a client’s overall financial position and then develops a strategy to help the client better manage their debt load. Reputable services will create a unique strategy based upon the client’s individual situation and needs. The person seeking credit help should be wary of services offering pre-designed service packages because these services may not be appropriate for the client’s particular situation.
Most reputable credit counseling services offer the initial consultation for free or for a minimal fee. After the initial consultation, the service should give the client a basic idea of they can do for him, how much it will cost, and how payment can be made.
Though credit counseling services can be found online, it is usually recommended that someone seeking these services locate a local provider or one recommended by their non-creditor bank. There are many unscrupulous people online offering these services and since the client will be expected to provide a lot of private financial data, finding a local service that is an established business with real experts is a wise decision.
Since 2005, credit counseling has become a preliminary step to filing for bankruptcy. This change in the law has led credit counseling to become a factor in an individual’s credit rating. Although it is not directly factored into the score, a notice that the person is in counseling will be appended to his credit report. This notice may negatively impact the client’s ability to receive credit as the lender has no way of knowing if this measure is being taken in advance of filing for bankruptcy or not.
Therefore, credit counseling should not be employed by people that are able and willing to do their own credit repair. It should be the last step before bankruptcy.
Wendy Polisi is one of the founders of Finance the Dream which offers Rent to Own Homes and Lease Option Homes through out the United States. Their program is designed to help people with less than perfect credit achieve the goal of home ownership. To learn more about increasing credit score please visit her website.
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