What You Can (and Can’t) Expect from Credit Counseling Agencies

Credit counseling agencies can be a saving grace to people struggling with debt. It’s not hard to end up in a place where your credit has gotten out of control. Working with a credit counseling agency is one of the best ways to get your life back on track. But they’re not able to do absolutely everything. Here’s what you can (and can’t) expect from credit counseling agencies. 

What You Can Expect from Credit Counseling Agencies:

Provide Free Materials to Help Better Understand Debt

When you work with a credit counseling agency, one of the primary services you receive will be exactly what they’re advertising—counseling. Many credit counseling services operate as non-profit entities, which provide certain informational services and materials to consumers for free. 

This might include pamphlets to help understand different types of debt and important terms. Some credit counselors even provide free workshops. You should be skeptical of any service labelling itself as credit counseling that won’t give you anything for free. 

Obtain and Interpret Your Credit Report

Your credit report tells lenders how likely you are to pay them back if they give you money. That’s really important if you’re trying to take out a loan, as what’s on your credit report can greatly influence your interest rate—or whether a lender will work with you at all. 

It’s important to keep track of what’s on your credit report. For starters, having a higher credit score is going to make your financial life easier in every way. It’ll be significantly easier to obtain credit, and when you do, it’ll typically come with solid terms. You also want to keep an eye on your credit report because it’s one of the first places you’ll notice someone has been using your identity to commit fraud by opening lines of credit in your name. 

Assist You in Creating a Budget 

If you’re having trouble with your finances, and you’re not already using a budget, you need to start right now. Having a budget isn’t just about holding yourself accountable; it’s about actually seeing where you’re spending money. 

As much as we all want to believe we can keep track of every penny we spend, that’s simply not the case. When you start budgeting, you realize all the ways money has been slipping through the cracks. There are several schools of thought when it comes to budgeting and paying down debt. Working with a credit counselor can be a great way to determine what sort of plan will work best for your life. 

Create a Debt Management Plan with You

Speaking of plans, you should inquire as to whether a credit counseling agency can help you set up a debt management plan. This goes a step beyond simply creating a budget. When you work with a debt management agency, they’re going to look through your finances and decide if it’s possible to renegotiate terms with your lenders. You will then pay the agency directly, which will disburse payments to your creditors. People who complete debt relief programs can often entirely eliminate their debts in as little as 24 months. It’s important, however, to understand all the terms and risks involved before you agree to any kind of debt management plan.

What You Can’t Expect from Credit Counseling Agencies: 

Pay Your Debt for You

Credit counselors can do a lot to get consumers’ finances back on track. One thing they won’t do, however, is pay your bills for you. Some people might expect to get financial aid in the form of direct cash payments from a credit counseling agency. While this would be helpful for many people, it’s not a service typically offered.  

Advise You on Specific Financial Decisions

There’s a big difference between a credit counselor and a financial advisor. One of these people works for a non-profit that attempts to help people get their lives back on track if they’ve been inundated by debt. The other tells people where to park their excess income and wealth in order to make more money. Financial advising is a whole world to its own, and a credit counselor could potentially be held liable for steering you to buy or sell specific stocks, or make other decisions. This simply isn’t their job. 

Credit counseling agencies provide an important service for consumers. It’s good to know, however, what they can and can’t do for you. 

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