Dig Yourself Out From Debt: Contact A Credit Counseling Service
What You Need to Know about Credit Counseling
As more and more Americans rack up credit card debt, credit counseling services are becoming an important part of the financial landscape for many families. Faced with mounting bills and an inability to manage their expenses or their spending, it often seems like the only way out of debt is to seek professional help.
Debt Repayment Vs. Debt Settlement
It may be difficult to ascertain what credit counseling services actually offer from viewing the television advertisements. Many of them promise to help you reduce or eliminate debt practically effortlessly. The bottom line of how this affects your credit is not very clear.Employing a credit counseling service merely implies involving a professional counselor in your finances to give advice regarding management of debt and spending. If you contact one of these services, it will not be indicated on your credit report. If, however, you choose to allow them to set up a debt repayment plan (where the service negotiates lower interest rates to reduce your payments and speed up the repayment period), there will be a note on your credit report that you are participating in a repayment program. Your FICO score will not take this into account, but potential lenders will be able to see that you have sought professional assistance in managing your debts.
On the other hand, debt settlement programs WILL affect your credit record and score. These plans promise to reduce or eliminate debt by negotiating a reduction in the balance (not including interest) that is owed -- you are agreeing to, in essence, default on part of the debt.
While it may be in the best interest of your creditors to accept this plan (if the only other option is that you default on the debt entirely) the damage done to your credit record and score will follow you for seven years.
If It Seems Too Good To Be True, It Probably Is
The television advertisements promising to eliminate debt via a debt settlement program may do just that, but you will be paying for your decision for years to come. A better choice is to seek the advice of a credit counselor, and possibly enroll in a debt repayment program. This can help you get your finances back on track. While no one wants to admit they need credit counseling, it can help you repair your finances and set you on your way to a healthy financial future.
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