Like many other aspects of life, managing your money is a skill. Some people are simply better than others at managing their money and keeping in good graces in regards to their bills. Nearly everyone have some sort of debt at any given time-- a home mortgage, credit card bills, or a car payment. If, however, you find yourself facing more bills than you can manage on your own, you might want to consider getting the help of a credit counseling agency.
Usually, credit counseling is performed by non-profit agencies, and should not be mistaken with for-profit credit repair companies. Since these agencies will deal with some of your most sensitive financial information, you'll want to be absolutely positive that you're dealing with an capable and reputable organization before you get started with them. It begins with a search, either online or through the Yellow Pages for a credit counselor. After finding several of credit counseling agencies, you can then assess their reputation by checking with your local Better Business Bureau.
Beware of potential scams such as a company offering to provide you a new credit identity or claiming they can repair your credit history in a relatively short time. These are clear indications that you are dealing with a questionable agency and you should immediately look for another one.
Some credit counseling companies are strictly non-profit and actually offer their services for free to those they deem in need of financial guidance. Other agencies charge specific fees, ranging from an up-front deposit to a final bill that is based on the the number of hours that was spent drafting your financial plan.
You'll want to find out very quickly if you will eventually be charged for the services that they provide because if you are in debt, the last thing you need at this point is another bill. Once you've determined that you will be able to work with the agency, you can start repairing your credit rating by letting the agency consolidate your bills.
With your first visit to your credit agency, you should take all the copies and statements of your current loans and debts with you. Your counselor will need to know the details of your unique position, such as the total amount you owe and the monthly payments you should be making. From that point, it is the counselor's job. They will contact your creditors and try to negotiate lower payment terms and better interest rates. Credit counseling agencies can help you draft a debt repayment plan, outlining what needs to be done in order to clear all of your current debts. They calculate your income, along with any unforeseen financial setbacks (such as possible medical expenses) which are also taken into account when making up your financial plan.
Whatever is left of your debts are then converted into one lump sum, which you can then start to repay in monthly installments. In specific cases, an agency may buy the debt from your creditors, meaning you make your monthly payments directly to the agency itself. In other cases, the agency might intervene on your behalf, and convince your creditors to extend grace periods, temporarily suspend collections, or accept a reduced lump sum.
Credit counselors can help you in getting out of debt, but they cannot entirely erase any past damage to your credit report. Although past bad credit can remain on your report for several years, working with a credit counseling agency will still help you get approved for future credit because it shows that you put in a lot of effort to pay your debts.
Through a credit counseling agency, you will be able to make uniform payments against your outstanding balance, which reflects positively on your credit report, and will be very persuasive if you apply for credit in the future.
Best wishes for financial freedom and a secure future!