There is currently $800 billion in credit card debt in the US, with the average household holding around $14k in credit card debt and the number growing with each year, the popularity of credit counseling has been rising simultaneously.

Credit card debt is a problem for a lot of folks and can get unmanageable when you find yourself missing payments, and the total balances start climbing past your annual income. For those of us that are really stressing out about our credit card debt, and befuddled about what to do with ourselves credit counseling might be a viable alternative to bankruptcy.

Before you join any program you should really weight out the pros and cons, that rule should be important when you’re dealing with anything financial.

Credit Counseling Pros:

· Education: In the 1950s credit counseling was first established as a way to spread “financial literacy” throughout the US. Credit counseling is still a very valuable educational resource for personal finance, and somebody who is deep in credit card debt is probably a personal finance misfit who has never had anybody speak to them in regards to things like debt, setting up a budget and credit cards. Good credit counseling revolves and focuses on educating the consumer and providing them with the tools, resources and information on how to avoid bankruptcy.

· Interest rates: If you choose to enter a debt management plan (DMP) than you will benefit from your credit counselor negotiating with your creditors lower interest rates for your credit cards.

· Harassment: Are you tired of harassing creditors calling you while you’re at home or trying to spend time with your family? Well if your credit counselor has done his job than those phone calls should most likely stop.

· Save Money: A good credit counselors is skilled at the art of negotiation and will negotiate lower interest rates for you, get credit card fees, and over the limit fees waived.

· Credit rating: In the long run getting rid of your debt, and paying off your credit cards in a timely fashion is going to eventually help your credit rating but even more important give you peace of mind.

Credit Counseling Cons:

· Monthly fees: Most credit counseling organizations are non profit, but that doesn’t mean a debt management plan isn’t going to cost you. Most DMPs will cost a consumer around $50 tops.

· Home buying: If you’re in credit counseling it will show up on your credit report and banks may have a hard time lending to a borrower that has supposed credit card problems. This is something to consider if you’re in the market for a home, but sometimes a credit counselor can take you off the program if you’re in the market for a home, temporarily, until you have closed on your homes.

· DMP: Some credit counseling organizations will take you off the debt management plan if you miss one payment, so you have to be cognizant and on top of your payments.

Credit counseling has helped many individuals out of debt, but that’s not to say that it comes without problems, getting out of debt takes discipline, hard work and sacrifice. You have to be committed to your personal finance growth if you want to become financially independent from debt.

Debt consolidation credit counseling is an important undertaking. Avoiding bankruptcy and keeping your credit record intact are two keys to financial success. You also need to know how to distinguish a good credit counseling agency from a bad one. There are many good credit counseling agencies out there but some are bad apples. It is important to understand how credit counseling can effect your credit report. Also be aware of a key change to the bankruptcy laws that involve credit counseling.

What is Debt Consolidation Credit Counseling?

Debt consolidation credit counseling agencies provide a service to people who are in over their heads in debt. Credit counseling agencies provide counselors, education, and Debt Management Plans (DMP). A Debt Management Plan is a service where consumers send an agency a lump sum payment which is then distributed to creditors who have agreed to the plan. Creditors sometimes agree to lower interest rates, waive fees, and post updates to credit reports as well. The convenience of making one payment to a single credit counseling agency is also a plus. The problem with Debt Management Plans is they only address unsecured debt. Secured debts such as home loans or auto loans should be prioritized and paid first. You risk losing your home through foreclosure and your car through repossession if you fail to make your payments.

How to Find a Good Debt Consolidation Credit Counseling Agency

A good credit counseling agency is one that offers an in-person consulting in your local area. Services beyond Debt Management Plans including personalized education are also good options to expect. The National Foundation for Credit Counseling (NFCA) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) are the key industry groups for credit counseling agencies to be members of. Ideally you want a counselor who will give you personal attention and present you with all of your options. You don’t want to feel pressured into a bad decision.

Some Debt Consolidation Credit Counseling is a Scam

With consumer debt at an all time high and federal personal bankruptcy laws requiring credit counseling many aggressive agencies have opened up shop targeting unsuspecting consumers in need. Non-profit credit counseling status does guarantee legitimacy or trustworthiness. In many states non-profit status is a requirement for a debt consolidation credit counseling agency to do business. Another caveat is that some not-for-profit credit counseling agencies are closely aligned with for profit businesses. Some debt consolidation credit counseling agencies charge excessive fees and only push DMPs. Asking good questions and referring to credit counseling agencies on the NFCA and AICCCA lists will help you sort the wheat from the chaff.

How Debt Consolidation Credit Counseling May Effect Your Credit Report

When you enter into a Debt Management Plan creditors will often make updates to your credit report. These updates include “re-aging” accounts and removing delinquent payment references. A potential drawback is that since lending is subjective, lenders may consider the notes your creditors put on your report as a good or bad sign. A good sign would be that you took steps through credit counseling to take care of your debts. A perceived bad sign would be that you had so much debt that it became unmanageable and you may be a credit risk. In the long term this may effect your credit score.

Debt Consolidation Credit Counseling and Personal Bankruptcy

If you decide that personal bankruptcy is the best course of action for your situation, you need to be aware of a key change to the bankruptcy laws. Before you can file for bankruptcy under either Chapter 7 or Chapter 13 you need to know the law. Changes in the Federal bankruptcy laws brought about by the Bankruptcy Act of 2005 require folks to get credit counseling from a federally approved agency six months before they can take advantage of bankruptcy protection.

Legitimate consumer credit counseling services are not easy to find, as many of them have come under public wrath of late. A common criticism about credit counseling is that participating in such a plan ruins a consumer’s credit which also has led to charges that credit counseling is a marketing gimmick the lending industry makes use of. Probably it is for this reason the experts opine that credit counseling is ineffective. But one must not forget that credit counseling is not the same as debt consolidation.

In the forefront is the Christian credit counseling which is making a difference in this field not just by demonstrating genuine intentions but also by offering credit counseling in an affordable way to consumers. It helps consumers take steps to improve their credit.

A consumer credit counseling service has the goal educating debtors of different consolidation ways. Of which the secured debt credit is the one with which you can avoid unnecessary additional clerical costs and also prevent legal actions against you. In short credit counseling is designed to persons who are neck deep in debt.

The Statutory Bindings

If you are looking for information on nonprofit credit counseling agency Christian credit counseling is your natural first choice. Like all nonprofit organizations they have an obligation to educate and counsel the needy people. All nonprofit credit counseling agencies are bound by nonprofit corporation statutes and comply with state charitable solicitation laws. This is why nonprofit credit counseling agencies provide free services or at least charge minimal fees to recover their cost. It helps to keep in mind that appropriate Federal and Senate committees have taken cognizance of the profitable nature of some of the nonprofit credit counseling agencies.

In fact, for more than five decades now, nonprofit credit counseling organizations are helping consumers. Those providing assistance to consumers credit counseling and debt management services must keep your private information confidential. Rules are put in place to limit the fees a nonprofit credit counseling firm charge their clients. Californian licensed nonprofit credit counseling firms must file their financials with the statutory agencies regularly.

However, some community credit counseling services are setting precedence and are taking their services beyond expectations. If you act sensibly you can actually get free counseling and debt consolidation advice from them.

Here Are Some Helpful Steps

List out all community based and nonprofit credit counseling services.
Checkout their accreditations and business histories through their websites and testimonials.
Talk to them before signing any documents.
Don’t leave anything to ambiguity; get their and your obligations in writing.
Take help from The National Foundation for Credit Counseling for researching about some credit counseling organization.
You must always remember, at the back of your mind that, credit counseling is a legal and ethical alternative to file bankruptcy. In any case, credit counseling is a viable option before meeting a bankruptcy attorney. For an industry having more than its share of questionable reputation, at least this is the only way out. In addition, for those consumer credit counseling agencies in the for-profit side of the industry, the problem is that the fees are rather too high and typically take long tim

There are many types of debt relief solutions that you can use to reduce and resolve your debt problem. Among the common one is consumer credit counseling which involve financial education offered mostly by non-profit organizations to get people out of debt. Beside the advices and education courses on money management, consumer credit counseling often tight with the aid of a debt repayment plan that requires you to make a monthly deposit to the credit counseling agency, which will then pay off to your creditors according to a payment schedule set by your credit counselor. Overall, it is a good option to approach a consumer credit counseling agency, but it has some limitations that you have to know before your select consumer credit counseling as your debt relief option.

Credit Counseling Limitations

1. No All Debts Are Included

Consumer credit counseling does not deal with all types of debts. There may be some debts that are unable to place into your debt repayment plan, which include:

Secured debts such as mortgages and car loan.
Current bills for utilities.
If your debt problem is caused by those debts above, then credit counseling services can’t really help you.

2. Can’t Help To Reduce Debt Principal

Credit counseling services can’t help you to reduce the amount of debt principal you owe. You need to go for a debt negotiation or debt settlement services if you look for the potential reduction of the amount of your debt principal. What the credit counselor may help are:

Reduce or waive your interest rate agreed by creditors.
Reduce your monthly payment by prolong the debt repayment period so that the amount used to pay your monthly debt is within your financial capability.
3. Can’t Freeze or Protect Your Credit Rating
Consumer credit counselors will not report their client participation in their debt management program to credit bureaus. However, it may be reported by the creditors which will cause negative impacts to your credit report. If you choose to participate into the debt management plan offered by consumer credit counseling, you should maintain your obligation to reduce the negative impacts to your credit report because the creditors may re-age your account and set the status to current in your credit report.

Summary

Credit counseling service can provides a solution for debtors to get out of debt, but it may not the best option for everyone. You should understand the limitations of consumer credit counseling before you choose it to be your debt relief solution.

When we find ourselves at the helm of a ship drowning in a sea of credit card debt there are organizations that we can turn to, and with a little due diligence and articles such as the one your reading right now can help yo navigate you to safe waters, and get you on the path to financial freedom. Credit counseling is one of those organizations that fall under the “debt solutions” category and out of all the different solutions and organizations that could assist you in time of financial crisis credit counseling will probably give you the most bang for your buck.

It was first established in the 1950′s when creditors created the National Foundation for Credit Counseling or NFCC for the purpose of, according to the W. Patrick Boisclair, Chairman of the NFCC, “the NFCC initially monitored legislative and regulatory activity for its retail credit members” and “also conducted public awareness campaigns on credit.” Their mission statement reflected an objective to help the American consumer avoid bankruptcy and keep them educated on fiscal responsibility. In 1993 another organization was established called the “Independent Consumer Credit Counseling Agencies,” or AICCCA, stating that there was a need for, “industry…standards of excellence and ethical conduct.” In 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made counseling a requirement 180 days prior to filing bankruptcy.

So now credit counseling has been such an integral part of financial health when facing the prospect of bankruptcy that now there are approximately 300 organizations that offer credit counseling in the US. Previous to choosing one of these organizations to assist you, let’s get a better grasp on what credit counseling is and how we can benefit from this breakthrough methodologies.

The main goal of credit counseling, if you walk away with anything, would be to educate you on credit card debt, and how you can avoid being swamped underneath a mountain of credit card debt. Another big part of the process is the credit counselor is involved with the negotiation of better terms across your unsecured credit card debt, which translates to lower rates and lower overall debt. Most likely, you will find yourself enrolled in a debt management plan (or DMP).

The DMP

The debt management plan is another huge benefit of enrolling into counseling. A DMP is fairly simple, after your enroll in the DMP, and the credit counselor negotiates lower interest rates you close your accounts, and stop making your monthly payments directly to your creditors and begin paying the agency one payment who will disburse the funds according to the terms of the DMP.

Many counseling agencies tout some significant savings and advertise that they cut your debt by 50%-60% and you will be “debt free’ in little as two years. Realistically the industry average is you will be able to cut your debt by 20% and the DMP usually has a turnaround of about 4 years to be completely free of your debt.

Another benefit of enrolling in a DMP is the lowering of interest rates. The interst rate on a credit card that has been defaulted on is usually in the range of 30% to 50%, after enrolling in a DMP, a seasoned credit counselor can negotiate a lower interest rate where your payments will be a more manageable dollar amount reflecting your income.

Credit Counseling Scams

Unfortunately there are some fly by night credit counseling agencies that are seriously lacking in the ethics department. There are some red flags, or signals, that you should be cognizant of on your search for an agency.

Some of the more obvious red flags are:

They refuse to give any references or contact information to testimonials.
They promise that they can lower your debt in by a ridiculous amount in a ridiculous amount of time.
Poor rating on the BBB or several poor reviews on the internet.
You received an unsolicited email or phone call from them.