Credit counseling is one step that people with unmanageable debts are often considering. However, it is worth knowing that your debts won't disappear simply because you signed up for credit counseling. In fact, it is also possible for people to not qualify for debt management plans even if they go for credit counseling. Debt management plans are programs that will consolidate a person's bills into one manageable monthly payment.
In a credit counseling, people will typically get advice about the reduction of their spending and the payment of their debts. They will also be advised on how to change their habits that brought them to that situation in the first place.
However, it's not everyday that agencies put people up for debt management plans. Most people may think that credit counselings mean that the counselors will immediately negotiate lower rates and manageable payment terms with the creditors for them. However, this isn't always the case, and debt management plans isn't the only service that credit counselors provide to people.
What Happens At Credit Counseling
According to one credit counseling agency, about a thousand calls are received by their company on a daily basis, but only about a hundred of those people are given a debt management plan. Non qualification of other people may have been caused by their interest rates being already low. Meaning, if their rates are already low, creditors won't be able to lower them even more. Also, it is possible for clients to not qualify for a debt management program if his/her income isn't enough to manage debt payments, i.e. unemployed individuals.
Non Profit Credit Counseling Agencies
It is important to choose the right counseling agency if you need credit counseling. If possible, go for non profit agencies who charge zero to little fees. Besides, you already need help in budgeting, it wouldn't make sense to spend much getting that help.
Credit Counseling And FICO Score
If you worry about the impact of credit counseling on your credit score, you should know that counselors do not report to national credit bureaus, so your credit score won't be affected if you undergo debt management plans. However, it is important to know that your credit score will suffer if you do not meet your new monthly payment on time, mainly because if the new payment terms are not met, these will already be reported to the credit bureaus.
In general, credit counseling helps people not only get manageable payments, but also in getting educated about responsible financial handling, and getting back on their feet after struggling with their income and payments.
