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Credit Counseling

Credit counseling services were originated by Visa to recover some of the money they lost when clients fell behind on their payments. Non profit consumer credit counseling companies were formed in the 80's. Because of their monetary loss, credit card companies helped found and fund consumer credit counseling services. In other words, they may not represent your best interests. Acting as separate organizations from creditors, Non profit consumer credit counseling services claimed they were established to help the consumer. Calling themselves non profit credit counseling companies, they acquired thousands of consumers while still charging interest and additional fees. This type of debt solution can be found under many names: Credit counseling, non profit Consumer credit counseling services, debt management services, non profit debt management service, non profit Consumer Credit management, and non profit debt consolidation.

Non-profit consumer credit counseling services are paid a commission based on the debt recovered from you, (this is called a "fair share"). Until recently these consumer credit counseling services were paid a "fair share" of 12% to 15%. This changed in 1999, when it was reported that many people were using credit counseling services just to lower interest rates. As a result, the creditors cut commissions paid to the non profit consumer credit counseling services to an average of 8%. As a result many credit counseling services became unstable. They were forced to charge consumers additional fees, upfront fees, and miscellaneous "donation" fees.

Credit counseling programs work as follows: You make one payment to the non profit credit counseling company and they split up the money to your creditors. Consumer credit counseling services do not reduce your principal balance. Credit counseling services actually have pre-negotiated interest rates with creditors. Your current interest rate may be reduced, stay the same or even increase. Many people who use Non profit Credit counseling services find their monthly payments were lower before they joined a program. Consumers are often drawn in by the convenience, knowing they will only have to make one payment to the consumer credit counseling service each month. Unfortunately, you must now depend on the consumer credit counseling service to make your payment on time. Many non profit consumer credit counseling services are disorganized. If the credit counseling service makes a late payment, they are not affected, the debt increases and they recover more money from you in fair share. You, however, will receive late marks, late fees, and additional interest charges. It has been estimated that approximately 65 - 70% of the people who enter a credit counseling service are unsuccessful and do not finish.

Remember, credit counseling has no effect on your principal balance. It is a good solution for those that have many small bills to pay or for those with a few thousand dollars in debt at a high interest rate. If you can afford to pay your bills each month, you should probably do it on your own. It will be better for you in the long run. If you cannot afford to do so, a faster, more cost effective option than credit counseling is Debt Settlement. Click Here for a free consultation for a solution that may better impact your situation.
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Need Lower Payments Than What Credit Counseling Can Offer?

If you are overwhelmed with debt and struggling month-to-month to make ends meet, then a Credit Counseling program might not be right for you. With $15,000 or more of credit cards and other unsecured debts, a Debt Settlement program could be $100's less monthly. Also, you could be debt free in roughly half the time for half the total cost of a Credit Counseling program.  Get immediate help and fix your financial situation for the future.
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