Credit counseling is the practice of helping people make better decisions about their money. The counselors who work in this field are trained professionals who can assist you with creating a budget, getting a handle on your debts, or improving your credit. Many organizations offer credit counseling as a service, either in-person, online or over the phone.
Choosing a quality provider is important. Even though most counseling services are non-profits, this does not mean their services are free. This leads some unscrupulous people to pose as counseling agencies in order to collect fees. It is important to investigate counseling services thoroughly, especially those that offer sessions over the phone or online. The FTC has some suggestions about how to make sure a credit counseling organization is legitimate here.
Although many counseling agencies do collect fees on a sliding scale in order to cover their operating costs, don?t assume that you cannot afford to get help. Explain your situation, and a good counseling agency will work with you. They may offer free help, create a payment plan, or give you other latitude in payment. These organizations exist to offer aid with repairing your finances, and they want to help.
In most cases, credit counselors work with you to assess your financial needs and create a realistic budget. This involves assessing your income, debts, and living expenses and making a reasoned plan that you can stick to. They may provide information on new ways to manage your finances as well as an outside perspective on where you may be going wrong.
Another option that a counseling agency may offer is a Debt Management Plan (DMP). This is a program where all of your payments for unsecured debt such as student loans and credit cards go through the counseling agency. It may reduce your interest rate and fees, but does not necessarily. Some people find it very helpful for getting creditors off their backs, however.
A debt settlement program is different from a DMP. These programs claim to settle your debt for a smaller amount than what you owe. They can have long-term negative effects on your credit, and they can be financially risky. Some of them are outright scams. Be extremely cautious when considering either a DMP or a debt settlement plan, and contact your creditors directly to make sure they have agreed to the terms of either program.
Credit counseling is not really about fixing your credit, but it can help with the process considerably. Poor credit scores usually come from failing to make minimum payments and/or having a lot of debt. Putting together a plan and making future payments on time will significantly help you to repair your credit score.
Source: http://www.fixingbadcredit.org/what-is-credit-counseling/
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