Keeping Your Expectations in Check with Credit Counseling
The decision to seek credit counseling is probably because your debts are getting to be too much to handle. And some make the mistake of setting their expectations too high when it comes to what a credit counseling agency can do. The agencies are offering programs and solutions for you to get out of debt but they are dealing with a very difficult problem: your financial situation. Set your expectations appropriately to help ensure your success in getting out of debt. Here are some things to consider in setting those expectations:
Credit counselors have to deal with many variables. Try to imagine someone handing you a stack of your credit card bills and wanting you to figure out a plan for getting them paid off in 3-5 years. Every creditor has a different way of doing things. The credit counselor may be familiar with only some of your creditors and others are total strangers. Imagine someone who took out payday loans to get through their personal financial crisis. There are numerous payday loan companies and each has their own interest rate and method of conducting business. Not all credit counseling agencies handle payday loans and this could be one of the reasons. The bottom line is that you should maintain patience while the credit counselor figures out all the variables in your present financial situation.
The credit counseling agency has to stay in business. Can you imagine a credit counseling agency handling your particular program in a debt management plan and going out of business during it? Many people make the mistake of thinking that when a credit counseling agency says it is “non-profit” that it is analogous with “free.” When a credit counseling agency is non-profit, it means that credit card companies are paying much of the expense involved in running the credit counseling agency. In other words, the credit counseling agency more than likely would not exist unless it was for donations made by the creditors. Creditors have an interest in recovering a good portion of the debt owed them so they make these contributions.
Credit counseling is not credit repair. Some mistakenly think that by using a credit counseling service that it will also reverse any bad credit marks in their credit record. The fact that you utilized a credit counseling agency along with their debt management program will show up in your credit report and probably stick around for 7 years. But most of the time you should not even be thinking about getting new credit and the new debt associated with it anyways. And any credit counseling debt management program that promises to repair your credit should be avoided because they can’t promise that realistically.
Creditors may or may not stop additional fees and lower interest. Many of the creditors will gladly drop interest rates and late fees because now there is a possibility of recovering the debt owed. But some of your creditors won’t buy into your debt management plan and you should expect that.
You will not get out of debt overnight. Depending on the extent of debt you are in, you will probably be in a debt management program offered by the credit counseling company for a few years. However the length of time that you will be in the program paying off your debts will be significantly shorter than if you were to try to pay down the debts through minimum payments on your credit cards.
You may still get sued if you have some extremely delinquent or collections accounts. There is nothing stop a creditor from filing a claim in civil court to get you to pay your debt. This might happen with a creditor that does not participate in the debt management program and wants their debt repaid quicly. If you have a creditor like that then you might want to consider coming up with a settlement lump sum specifically for it.