The Pros and Cons of Working with Credit Counselors

July 1st, 2015 by

When you have a bad credit history and score, you have few financial options. Traditional lenders won’t give you the loans you need for things like a home or car, and subprime lenders will try to take advantage of your vulnerable state by charging you exorbitant interest rates and fees.

You can get affordable financing for reliable transportation by visiting bad credit car dealers like McCluskey Automotive, but that will only take care of one problem. What do you do to get the financing you need for other essential needs?

In the past 10 years or so, credit counseling has become a popular option for people looking for debt relief. Counselors can provide financial education to help people learn how to better manage their finances and get out of debt, or they can assist with a debt repayment plan.

Credit counseling isn’t the best option for everyone. Here are some pros and cons to consider before you seek out or sign with an agency:

Possible Benefits

Erasing Debt

Some people have financial troubles because of events that are out of their control, such as being seriously injured in an accident or losing their jobs during company downsizing. However, many others wind up in over their heads in debt because they did not practice good financial planning.

A credit counseling agency can help people learn how to create a realistic budget, how to minimize debt and how to start saving for the future. People can work with counselors one-on-one or they can attend workshops or seminars hosted by the agency.

When people are done working with a credit counselor, they have a better understanding of how to manage their finances so they are less likely to experience credit problems again.

Credit counseling agencies can also provide general finance advice to those going through a divorce, a job loss, the home buying process or other major events. They don’t have to be in financial crisis to get this advice.

One of the most popular reasons to work with a credit counseling agency is that it may be able to negotiate with your creditors on your behalf and set up a debt repayment plan that includes a lower interest rate. Instead of making multiple payments to credit card companies and other lenders, you can make one monthly payment to the credit counseling agency. With the right repayment plan, you can save money and get out of debt faster.

Some credit counseling agencies can even intervene on your behalf to prevent foreclosure.

Finally, credit counseling agencies can also help you deal with calls from your creditors, making sure that they don’t cross the line when trying to collect. Some unscrupulous creditors will use illegal tactics to harass and intimidate delinquent borrowers, and your counselor can help you protect your legal rights when dealing with these lenders.

Potential Drawbacks

Credit Consulting

Unfortunately, there are unscrupulous people everywhere looking to take advantage of those who are down on their luck. The credit counseling industry is rife with unethical people, and if you don’t find a creditable agency to work with, you could end up having even more financial troubles by the time you are done with their “help.”

One way that shady agencies will scam consumers is by charging high fees or including hidden fees in their monthly plan. Most agencies charge an initiation fee and then a monthly fee for managing the debt repayment plan, but some unethical agencies hide some of those fees from clients or charge more than is really fair.

Some agencies may even charge you a fee for their information sessions. While this isn’t an unethical practice, it does contribute to financial strain for those who are already struggling. You can get the information free from other agencies or even from the right library books.

You also don’t need a credit counseling agency to create a debt repayment plan or to negotiate with your creditors on your behalf. You can create these arrangements yourself by calling each of your creditors and negotiating for yourself. You don’t have to feel intimidated; credit card companies and other lenders will work directly with you just as readily as they will counseling agencies.

Some credit counseling agencies make promises that they can’t keep. They may say that they can clear your credit report of negative accounts or that they can improve your credit score by a certain number of points within a certain time period. Yet no agency can make these promises.

No counseling agency can make changes to your credit report — negative marks will remain even after you improve your credit score. While an agency can help you improve your credit score by helping you to reduce your overall debt, no agency can guarantee a certain score.

Finally, some credit counseling agencies may require that you have a minimum debt amount before they agree to work with you. If you don’t meet that minimum, you may not get the help you need.

Before deciding whether to work with a credit counseling agency, you need to be fully aware of all the pros and cons so that you can make an educated decision. If you do decide to work with one of these agencies, you must do your research first to make sure that you find a creditable agency that has certified counselors.

There are plenty of ways to improve your credit without working with a counselor. For example, you can shop bad credit car dealers to get a new car loan and maintain a positive history of timely payments. Not only will you get the new car that you need on affordable terms, but you’ll also start slowly improving your credit score.

McCluskey Automotive has a reputation as one of the best bad credit car dealers in the area. Visit us today to learn more about our affordable loan terms and our selection of quality, previously owned vehicles. You can take the first step toward rebuilding your financial future.