Who Needs Credit Counseling?

If you have already missed the payment date or you are a consumer that anticipates a possible hardship in near future can benefit from the service. It is always the best policy to visit counselor before any negative item enters into your credit report. If you are up-to-date with your accounts and beginning to suspect that you might fall behind you must see a counselor immediately to find a suitable way out and protect your credit.

Remember, once you have been taken to court and lose the judgment, it will be reported as a public record in your credit file and stay there for up to 10 years. You must take action before the debt gets out of control and puts you in a position were you have to you file for bankruptcy, go for credit counseling and stay creditworthy forever. Take notice of the warning signs that help you decide if you need credit counseling or not.

As far as a FICO Score is concerned, it does not matter if you are enrolled in credit counseling program or not. The FICO scoring model does not count this data. Credit lenders do not like to see credit counseling items on your report. But the Debt Consolidation Care Community says that the status proves that you are making an effort to pay your bills. So you will get some benefit from it in the future. Moreover, new the bankruptcy law in 2005 has made it mandatory to undergo a credit counseling session before filing for bankruptcy.

Two types of agencies are there in the market - non-profit and those who work against a nominal fee. Community members frequently ask the question why an agency would work without a fee. The answer is simple: the counseling agencies usually receive a particular portion of the fund paid to the creditor, known as Fair Share.

Beware of the agencies that pretend to be non-profit, but keep a part of consumers' money with them. Ask your counselor these questions:

• Is there any monthly charge, set up charge or penalty for leaving the program?
• Are these compulsory? A true non-profit firm should not incorporate any mandatory fees.

You must ensure that you work with a reliable agency so that you can get the most out of the service.

How long it will take to get out of debt?. That is a difficult question to answer because there are several factors that play a big part in determining the outcome. Let's look at an example: if you pay $200 per month it will take 10 months to repay a $2000 loan in full. But, if you decide to pay $100 per month, the repayment period is likely to be doubled. Counselors try to set up program so that you will become debt free within 2 to 4 years.