Should You Use a Credit Counseling Service?

We’ve all seen the ads on TV that promise to help you get out of debt.  They promise to work with your creditors, lower your payments, and lower your interest rates.  Then we see individuals who swear it worked for them and now they are debt free.  But, that little voice in the back of your head keeps saying “I don’t know about this…”

You are not alone.  Many, many people ask themselves this very question every day.  Should they use a credit counseling or consolidation service to eliminate their debt?

The first thing you need to know is what a credit counseling service does.  The legitimate companies out there do work with your creditors.  You give them a brutally honest picture of where you are with your debt, and in return, they give you an honest assessment of what you need to do.  They will work with your creditors to lower rates and negotiate payment plans.

With that in mind, if you are struggling with your credit card debt, BUT you are current on your accounts and able to pay your bills, credit counseling is not for you.  You would be better off contacting the credit card companies yourself and negotiating on your own behalf.

If, on the other hand, you cannot pay the minimums on your cards, are consistently late paying one or more regular bills, are being harassed by collections, or have not been able to work with the credit card companies successfully on your own, credit counseling could be for you.

Credit counseling companies are not miracle workers, but they can help if you really need it.  Most will work with your creditors, consolidate your debts, and set up a two to four year payment plan.  Also know that it will impact your credit rating, although there is still a lot of debate over whether or not it is the same, worse, or better than filing bankruptcy.  It all depends on the creditor you are working with.  If you are using an accredited, well-known counseling service, it can actually improve your standing in the eyes of your creditors.  Especially if you stick to the payment plan you have set up.

Many people have benefited from credit counseling services.  If you decide to go with a credit counseling service, make sure you are working with a legitimate company.  Be wary of large upfront fees and unrealistic promises.  Do your homework before deciding to seek the help of a credit counseling service and before choosing a service!

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