No sooner had I read the latest statistics on consumer debt in the United States (also known as household debt, credit card debt, and other unsecured debt) than a message washed up on my desk echoing the same matter, but on a much smaller level. This reader’s debt situation pales in the face of total U.S. consumer debt that has now climbed to $17,300,000,000,000—and yes, that is trillion. That’s a big problem for which I do not have a solution. As for my reader, as serious as her debt problem is, it is not without solution!
Make sure the organization you are dealing with is an accredited affiliate of the National Foundation for Credit Counseling. With offices all across the country, most are known by the name Consumer Credit Counseling Services, or CCCS. To find the office closest to you, call 1-800-388-2227 or visit NFCC.org. Many CCCS offices offer online counseling.
Ask about fees. Do not be timid here. There should be no charge for your initial meeting with a counselor. If you are accepted into its debt management program, there may be a small setup fee of less than $20. Monthly fees, if any, should not be much more than that. Consider it a warning sign if a credit counselor will not talk about their fees before you give them your information.
Once you’re in a program, your counselor will contact your credit card companies to negotiate lower interest rates and fees. Some creditors will cooperate, but they are not obligated. You will be making one debt payment to your counselor, trusting them to distribute it to your creditors. You need assurance that your payments will be made on time. Illegitimate counselors will often keep the entire first month’s payment as their fee, putting the client a month behind. Missing and late payments will make a bad situation even worse.
One sign of a reputable counseling organization is the education and counseling regarding the proper use of credit they offer to their enrolled clients. You want to make sure you learn how to not get into this same mess or worse in the future.
How will credit counseling affect your ability to get credit in the future? There is no way to know for sure because creditors report to the credit bureaus differently. Some banks will report you as delinquent for the first three months you are in counseling, and that’s a black mark that will show on your credit report for up to seven years. Other credit card issuers will simply add a comment that you are enrolled in credit counseling.
Future lenders may see credit counseling on your record as a good thing because you sought help when you were in a difficult situation. Others have a policy to not lend to anyone who has been in credit counseling.
If you are making your payments on time each month, credit counseling may not be right for you. Instead, call each of your creditors and ask that your interest rate be decreased, or if you might qualify for their hardship programs. They just might comply with your request. Remember, you are considered a preferred customer if you pay on time but cannot pay in full.
I wish you well, Patty. I’ve been where you are, believing there was no hope. But I was wrong! There is hope, there is a way out, and I know you will find it.
