Credit Counseling Debt Services

Credit Counseling Debt Services

Credit Counseling Debt Services

Q: Do credit counseling agencies help or hurt your credit? I would love to have the interest on some of my credit cards lowered, but I don’t want to jeopardize my credit. Please advise. 


Portland, OR

A: First, it’s not the credit counseling agencies themselves that may pose a risk to your credit scores. By the time you need help from one of these nonprofits (and you should use a nonprofit), you’ve probably already hurt your credit. 

So, what you are asking is: Does participating in a debt repayment plan set up by a legitimate, nonprofit credit counseling agency hurt your credit score?

The answer is in general, no. But that’s a “no” with a caveat.

Credit Counseling

 
If you aren’t careful, and you hook up with a scam agency or a poorly run one, the money you send every month to the agency to forward to your creditors as part of the payment plan could be sent off late. It’s the late payments that can damage your credit even further. In other words, if the agency doesn’t pay the creditors on time, that does, or can, get reported on your credit report.

Guidelines for Selecting the Right Credit Counselor 

Debt Services

Regardless of your particular need, selecting the right credit counselor is vital. Unfortunately, some organizations, including some that label themselves "nonprofit credit counseling agencies," may be more interested in their own bottom line than in helping their clients. A 2005 report by a U.S. Senate investigating committee observed: "Some new entrants to the industry, however, have developed a completely different business model - a 'for-profit model' designed so that their non-profit credit counseling agencies generate massive revenues for for-profit affiliates."

"Credit Counseling Service Debt Counseling Service Consumer Credit Crfedit Counseling"

By contrast, the report lauded the National Foundation for Credit Counseling (NFCC) for its commitment to ethical credit counseling that is provided at low cost to consumers. The report stated that ". . . if applied throughout the industry, these [NFCC] professional standards could significantly address the abusive practices identified in this Report."

Consumers need to "know the difference" when selecting a credit counselor. And they must know the warning signs of a credit counseling agency who might not have your best interests in mind. The following information can serve as a valuable guide to help consumers "know the difference" when choosing a credit counseling agency.

Credit Counseling Debt Services