When to Consider Credit Counseling

A credit counseling service can help you get out of a financial hole if you are behind on debt payments. These services work with lenders to negotiate a repayment schedule for you, often for less than the total amount you owe, and receive a portion of your payment back from the lender as compensation. The following information will help you know if you’re ready to use a credit counseling service.

You Can’t Meet Minimum Payments

The most common form of debt trouble for U.S. borrowers is credit card debt. Credit cards are easy to obtain, even with poor credit history, and you need only make minimum monthly payments. However, if you only pay the minimum, you are typically seeing your balance increase month to month, which can raise your minimum payment. The minimum credit card payment is a small amount. If you can’t meet that, you likely need help.

Regular Late Payments

If you can make your credit card minimums but can’t stay current on all your debt payments all the time, it is likely time for you to begin working with a credit counseling service as well.

Late payments are added to your credit history by your lenders. This will lower your credit score and make it harder and more expensive for you to borrow. If you are regularly late, stop the negative impact on your credit history by getting credit counseling.

Collection Agencies Are Calling

If you get behind on debt payments and make no effort to work with your lender, your account will be turned over to a collection agency. These businesses are compensated by getting at least some of the lender’s money back and will hound you. At this point, you are behind by multiple payments and are impacting your credit score.

At an Impasse with Lenders

You might have started working with your lenders to work out a payment schedule to get caught up on delinquent bills. If you come to a point where these negotiations are going nowhere, it’s time to get professional help.

Do be careful in choosing a credit counseling service. The upfront fee for services should be about $10 just to set up your account. If they are asking for a lot more, be wary. Once they renegotiate with your lender, you pay the credit counseling service and they pay the lender. Be certain the service pays immediately. Delayed payments can further harm your credit score.

You’re Ready to Commit

If you start a credit counseling service program for loan non payment and then stop, you have done yourself more harm than good. Lenders view you favorably for making the effort to get current but will be less likely to negotiate again if you start a program to which they have agreed and then you quit.

About half of debtors who start a credit counseling program quit it prior to completion. Be certain you are able and willing to commit to your program before beginning.


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