All About Credit Counseling
Let’s say that you’re way over your head regarding your debt. The creditors are sending nasty letters, and even worse, calling you at home and making you feel about two inches tall. It’s tempting to ignore them and hope they’ll go away, but you’re just asking to have your credit ruined forever. Even if you think you’re too far gone to save your credit score, there could be a solution for you. No, it won’t erase your mistakes, but it could soften the blow and get your credit back on track more quickly.
Credit counseling, which refers to any debt-relief services offered by credit counseling companies, can help you with those mounting bills. The most common plans, debt consolidation, and debt management are reasonable solutions for people who have fallen too far behind to catch up on their own. Typically, a credit counselor will call each of your creditors and negotiate on your behalf. They will let the creditors know that you are working on paying, and they can usually convince the companies to waive your late fees and even lower your interest rates. Then you pay one payment to the credit counseling company each month, which deals with the creditors. This means that those letters and phone calls will finally stop!
Credit counseling will help with those more unpleasant aspects of your debt, but you still can’t escape with a potentially tarnished credit report. Each obligation you turn over to the credit counseling company will end up marked “does not pay account as agreed” on your credit report. This will affect your credit score, but you should always consider the alternative. If you’re so far behind that you know you can’t catch up on your own, the temptation to stop paying altogether is too great. However, each account you fail to resolve will get your credit report labeled. This is a much bigger hit to your overall score than not paying your account as agreed.
Worst yet, if you ignore those past-due bills long enough, you may feel tempted to declare bankruptcy. This is the worst mark you can put on your credit, which stays on your report for numerous years. Those “does not pay account as agreed” charges will disappear after several years, no matter what. And if you’re trying to apply for credit a few years down the road, your potential creditor will look a lot more favorably on an applicant who didn’t pay as agreed than one who didn’t pay at all.
Thank you for reading and hope you have a good rest of the day!
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