Consumer Credit Counseling

There are two reasons to consider consumer credit counseling. The first is if you don’t feel confident that you can do what is necessary to regain control by yourself. The second is when you are seriously considering bankruptcy. You can no longer file for bankruptcy without having first consulted a consumer credit counselor.

Be very wary of a credit counseling service that solicits your business or of anybody who claims they can ‘fix’ your credit. A credit counseling service can help you by determining if you need to set up a Debt Management Plan (DMP). They can help you manage it (for a fee, of course). They can also teach you how to handle your money better so you don’t get into trouble again. They can help you negotiate with your creditors and may be able to get fees lowered. Some of them have consumer classes where you will learn how to budget. But you have to do the homework to find the credit counseling agency that’s best for you.

Ask around. Ask your credit union, your bank, or your local Better Business Bureau. The Federal Trade Commission has an excellent site explaining in great detail what credit counseling is and how DMPs work. They also explain how to shop for a counseling agency and what to look out for. Be particularly wary of ‘debt negotiation’. You want to make sure the counseling agency is not just another way for you to get ripped off.

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