Debt Counseling can HELP your debt problems
Consumer Debt Counseling Guide Locator
What Is Credit Counseling
Consumer Credit Counseling services (or consumer debt counseling) is a process by a third-party company or advisor to provide you information, guidance and support on budgeting, money, credit and debt management. Certified credit counselors help people that have overextended their use of credit to regain control of their financial situation by avoiding excessive debt that cannot be comfortably maintained. Often consumer credit counseling is performed at no or minimal cost to you.
For those that need a formal, structured approach to managing their debts, credit counseling companies also offer a Debt Management Program (DMP) service. In this case, you are enrolled in a DMP and the credit counseling company serves as your proxy negotiating with your creditors. This process includes setting up a repayment plan with your creditor as well negotiating reductions in interest charges and penalties fees.
Non-Profit Credit Counseling
For-Profit Credit Counseling
How Does Credit Counseling Work?
The credit counselor will ask for some basic information:
- Your Income
- Current unsecured debt, plus mortgage and auto loans
- Monthly expenses – food, clothing, school, transportation. Everything.
- Current credit card balances, late payments, APRs
- Other unsecured loans – medical, private student and personal loans
The credit counselor will run a soft credit inquiry of your history to determine whether there are late payments, collections, etc. This does not negatively impact your credit score.
After review, the credit counselor builds a “profile” of your financial history. The counselor can then recommend various debt relief options including.
- Balance Transfers
- Debt Management Program (DMP)
- Debt Consolidation
- Debt Settlement
The credit counselor is required to be neutral and present ALL your debt relief options, even if their agency does not offer the service, for example Debt Consolidation or Debt Settlement.
Debt Management Program
The Debt Management Program is a central fund administered by the credit counseling agency.
The credit counselor will review with you which non-secured debts, like your credit cards, medical bills, and personal loans you wish included. You will NOT have access to any credit card in the DMP. You might keep one credit card out for emergencies.
Based on your budget and debts, you and the credit counselor will determine a monthly payment amount.
Your credit counselor works with your lenders to agree to participate and lower your debt costs (APR and late fees).
You make monthly deposits to the credit counseling agency.
The consumer debt counseling agency uses your deposits to pay your creditors monthly.
Normally there is a set up fee and monthly fee for administration.
The basic benefits of a Debt Management Program include:
- Reduce And Stop Debt Collector Calls
- Potentially Lower Debt Interest Rates
- Lower Monthly Payments
- Waiver Of Late And Over Limit Creditor Fees
- Potential Paying Off Your Debts Faster
- Improving Your Credit Score By Making Consistent, On-Time Payments
Analyze your current financial and debt situation.
Explain the different debt relief options for your credit card and other unsecured debts.
Assist you in selecting the debt relief option best suited to your particular needs.
If you use a Debt Management Program, it will simplify, lower your creditor payments and reduce your credit card debts faster. Also creditor collection calls would be handled by the credit counselor.
Teach you how to develop a spending budget and manage your debts effectively.
Help you achieve long-term control of your financial future.
Immediate reduction in your debt. All debt relief options take time. A Debt Management Program normally requires 36 to 60 month to complete.
Consolidate your debts. These are available through credit card balance cards or traditional secured or unsecured loan lenders.
Reduce your existing debt through debt negotiation. You may be directed to seek out debt settlement services as your best option, but the credit counselor cannot assist in your enrollment.
Advise you on other types of consumer debt such as mortgages, tax or government student loans. The credit counselor can provide recommendations to other debt relief providers.
Intercede in any existing legal court actions regarding your debt.
Report your credit history. The credit counselor can provide recommendations for this service.
Most Americans, particularly starting their financial life, have difficulty budgeting their finances, paying the bills on time and carrying excessive amount of credit card debt.
Consumer debt counseling offers you a third-party, independent financial expert who can analyze your unique financial situation.
You can benefit from the financial education provided and recommended debt relief actions.
If a Debt Management Program (DMP) is recommended, it will not eliminate your unsecured debts but will help you get them under control. It can be a successful debt relief option when:
- Your unsecured debts (credit cards, medical bills, personal loans) are at least $5,000 or greater.
- You have monthly income to set aside to fund the DMP. If you are unemployed, no option.
- The unsecured debts are with the original lender, rather than a collection agency. Otherwise the lender has “charged off” the debt (taken a loss) and there is less chance a collection agency will participate.
- The majority of your unsecured debt should be credit cards to take advantage of a reductions in interest rates and penalty fees.
- Unsecured debts like medical bills and personal loans benefit more by renegotiating a payment plan or seeking debt settlement.
A primary benefit of participating in consumer debt counseling is that it is credit neutral. Your current credit profile (excellent, good, fair or poor) remains the same starting out.
Your credit consultation, where the credit counselor runs a soft credit check, has no affect.
If you successfully participate in a DMP, your credit history will demonstrate on time, consistency of credit card debt payments. This is positive to your credit history.
Your existing credit cards accounts will identify participation in a DMP and lenders will not approve opening new ones.
As your credit card debt is paid off, assuming you do not assume new debt, your Debt-To-Income ratio will improve. This is positive to your credit history.
You can apply for additional credit, like a house mortgage or auto financing. These secured loans, if approved, will add to your debt burden.
Your life goes on.
Credit Repair | Identity Theft
Frequently Asked Questions
Debt Relief Services
Debt relief refers to resolving your debt without taking out a new loan. Our financial partner debt relief program is designed to help you save as much money as possible, as quickly as possible, based on the money you have available. It puts you back in the driver’s seat to get you the maximum savings on your debt.
Our financial debt relief partner offers an in-house debt relief program where fees are earned based on results of the program. The way this program works is that money will accumulate on a monthly basis in a special purpose account. Alternatively, you may have a lump sum amount that will accelerate the program. Based on the amount of money accumulated, our financial debt relief partner will negotiate the best possible reductions for your debt. Each account is negotiated and resolved until all of them are settled.
Our debt relief financial partner offers services related to tax problems such as tax liens, wage garnishments, delinquent payroll tax issues, and other tax related issues. In some cases just by getting proper tax returns filed, a significant adjustment in the amount of taxes owed is realized.
Our debt relief financial partner is a member in good standing with the AFCC, the largest and oldest association for debt relief companies. In order to be a member of AFCC, a debt relief company has to comply with a stringent set of requirements and disclosures and maintain these standards in order to keep up with renewals.
As an alternative to bankruptcy, a debt relief strategy is the best and fastest way to get out of debt. However, there are conditions that must be taken into account for the program to work.
The most important factor that determines the success of a debt relief program is the individual’s ability to fulfill their payment obligations on a monthly basis for the duration of the program.
A number of factors influence the cost of entering a debt relief program such as the creditors you owe, your credit balances, your ability to contribute monthly dedicated account payments into the program, the amount that can be negotiated from your balance, how quickly it is negotiated, and the fees charges.
Our debt relief financial partner fees, on average, are 20% of the total debt amount enrolled and are calculated as part of your monthly repayment. There are no upfront fees to be enrolled in our debt relief financial partners’s relief program.
The goal of the debt relief program is to help save you as much money as possible, as fast as possible.
Our focus is to help you save as much money as possible, as soon as possible. Your focus should be on your job or business and family. It’s hard enough having to manage everything going on around you and still have to worry about your debt. Our debt relief financial partner has professional, trained staff to provide you with the best way forward.
While you ensure that you make your payments monthly, which may account for 2% of the effort, our debt relief financial partner is working tirelessly to ensure that the other 98% of the process is in place and managed to help you save money and be debt free as quickly and painlessly as possible.
Loans such as federal student loans, certain credit union accounts, and government loans are not eligible to be included in a debt relief program. Any loan that is secured to a physical item, such as auto or mortgage cannot be included.
Private student loans, that are not government backed, may be included in a debt relief program.
Our debt relief financial partner is licensed and/or bonded in numerous states. Our debt relief financial partner is in full compliance with federal and state laws, as well as meeting any licensing and bonding requirements as needed by each state where it provides services.
Once you are enrolled in a debt relief program, your responsibilities will include keeping up a great line of communication and making payments on a monthly basis into a special purpose account.
Our debt relief financial provider will handle the rest of the process and make sure that you save you as much money as possible, as fast as possible for as long as you are in the program.
Qualified candidates are those who have a legitimate financial hardship, which has caused them to fall behind on their payments to creditors, or will cause them to fall behind in the near future. Our debt relief financial partner only represents consumers who are truly in need of its services and stand to significantly improve their financial situation.
Due to your legitimate financial hardship, you are able to participate in this savings program in order to help pay your debts in the future. We are not here to advise you not to pay your debts now, however if you are able to make payments to your creditors, then you probably don’t actually have a legitimate financial hardship.
According to the US government: ” A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the ‘insolvency’ exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent.”
Consumer Credit Repair
The Fair Credit Reporting Act (FCRA) was written in 1970 as an amendment to the Consumer Credit Protection Act. The FCRA provides additional measures of consumer protection in the areas of fairness, accuracy, and privacy of the information collected by the credit bureaus. It also allows you to personally engage in credit repair and maintenance processes, verifying that the information in your credit report is correct.
A credit bureau – sometimes called a “consumer reporting agency” – is a business that collects relevant consumer information from creditors and courthouses, and then sells that information to interested parties such as potential lenders. Such information is sold in the form of a credit report. In the U.S., the three major credit bureaus are TransUnion, Experian, and Equifax.
Normally negative items will remain on your credit report for seven years, with the exception of bankruptcy (ten years). You may choose to dispute a negative item, but if it is accurate, the dispute will be rejected and the item will remain on your credit report. However, if the negative item violated consumer protection laws, it may be removed.
When an account is unpaid for more than 180 days, a creditor usually writes off the debt as a loss on their financial statements. This is known as a charge off. Once a debt is charged off, it is either transferred to an in-house collections department or sold to a third-party collection agency who will likely contact you in attempt to recoup the balance.
The time it takes to repair your credit is completely dependent upon your personal situation. Six months should be your guide if you have many issues with your credit report.
It is a common myth that negative items must remain on your credit report for a minimum number of years. In fact, there is no minimum time-frame. Creditors control the information they provide to the credit bureaus. They can also choose to remove negative items as well. The Fair Credit Reporting Act requires all reported information to be fair, accurate, and substantiated. If these conditions are not met, the credit bureaus are required to remove it.
Credit Repair is actually the process of removing inaccurate, unfounded, out of date, false, and erroneous information from your credit report. Your credit report dictates your credit score. The 3 major credit bureaus collect information from lenders, creditors, and debt collectors and apply it to your credit report. Based on that information, your credit score is determined. This information could include the balances on loans or credit cards, credit inquiries, debt to income ratio, and most importantly, credit utilization (the percentage of debt you have to available credit)
This is determined by what your goal is. Perhaps you are trying to buy a house. If this is the case, you might want to get started at least 6-9 months before you plan on purchasing. If you plan on purchasing a car, then you might to get started in 2-3 months.
You have the ability to dispute any information on your credit report you deem as inaccurate, unfounded, or incorrect. However many consumers have tried doing this themselves only to find out that the process takes too long, is confusing, and full of challenges they deem too stressful to deal with themselves. A third-party credit repair company can take the burden of disputing off your hands and have the ability to speed up the process through their experience. Think of a third-party credit repair company like you would think of a Tax preparer, Legal Service, or even a plumber. You could probably do it yourself, but perhaps not with the same end results. We highly suggest that all of our clients and prospective clients take some time to learn about their credit, credit reports, as well as the process of repairing their own credit. You may feel doing it yourself is the better route for you and your situation.
A good credit score helps you obtain low interest rates and long term loans, like home loans or car loans. Lenders may charge high interest rates or impose undesirable repayment plans for you. Given the stakes and the consequences involved, it is clearly to your advantage to work toward recovering from a bad credit rating.
Credit Bureaus are companies that maintain records of your credit lines and performance. Records can go back for up to ten years, in the case of bankruptcy data. Creditors, banks, mortgage companies and other financial institutions supply this information to the credit bureaus. The credit bureaus then compile this data into your a credit report. A credit report has details of how you have managed credit in the past, so other lenders can judge your credit worthiness.
Most likely your credit report has errors.
The Federal Trade Commission reported in a study conducted in 2012 that 26% of the credit reports they analyzed had errors. Of those with errors, 5% who disputed these errors increased their credit scores at least 25 points. That is a significant change in a credit score.
You should not assume that your credit reports are completely accurate.
No. Your credit report is independent of your spouse. The same is true of your credit scores. However…
A lender will likely take into consideration both of your credit reports when deciding on a home mortgage, for example. If your credit report is bad and your spouse’s good you may find that the loan, if approved, has a higher interest rate than if both were good.
It certainly can. Many employers will do a credit check of a potential employee to determine the stability of the job candidate. For job positions that entail financial responsibility, it is most likely you would experience a credit report check.
When you are initially contacted by a debt collector regarding an unpaid debt, you have the right to request proof of the debt within 30 days of initial contact. This is called debt validation. Unless the debt collector can validate that you are responsible for the debt, they must stop all further collection efforts.
The debt validation letter from collector needs to include: 1) Proof the debt exists; 2) Proof that you are responsible for the debt; and 3) Proof that the debt collector has legal right to collect on the debt.