Credit Counseling

Credit Counseling

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Do you find yourself in a position where you need Credit Counseling? For some, this is a new experience. You may have received emails from consumer credit companies which invite you to participate in their program to fix your credit. Depending on the scope of your credit problems, this can be a good option. However, if you don’t have a complicated credit picture, you can fix your credit with an inexpensive, DIY approach and save yourself the fees attached to using a company dedicated to this problem.

Initially you may want to address the number of credit cards you have. Maybe you have two or three. This varies from person to person, and so do the amounts of debt on each card. Add up all of the debt that these credit cards come to. Now take a closer look at the APR or Annual Percentage Rate on each of the cards.

Credit counseling and debt consolidation work as a “bailout” from under a sea of drowning debt and financial problems. What are credit counseling and debt consolidation? Credit counseling is done by professional consumer financial advisors to help assist you with reducing the amount of debt you have accrued. This is usually through a process of identifying expenditures, and then eliminating them. They also work with the credit bureaus to create a comprehensive picture of what your credit is, who you owe money to, and if all the information in play is completely accurate. You would be surprised how many times incorrect information can cost you money!

This is where you lose all your money each month. If you have high APRs, then you are likely hemorrhaging money in interest on a regular basis. Well, this is exactly what the credit card companies count on. It is how they make their money. Especially if you owe thousands of dollars on a card that has a high APR of around 18 percent or more.

Usually, the credit counselors don’t help you write off any part of your loan; you do have to pay it all. They just help you work out a plan. Debt management is where your financial planners help negotiate lower interest and more time. If you sign up for one of these, it can actually make your life more difficult, and not leave you enough money to live. Things can often get so difficult, that you may have to drop out. Debt management programs have high dropout rates for this reason. When you get desperate people to a debt-management meeting, and set a plan before them that squeezes them dry, they feel they want to do their best and get their life back on track; and they agree to impossible conditions. Credit counseling services these days try to make things somewhat easier on these poor people, by getting the credit card companies to back off, and accept lower payments so that people aren’t forced off the plan y the extreme hardship. And they encourage you to save a little, for a rainy day too.

However, the pep talks do wear a little thin on the ears of most Americans. Prior to the foreclosure crisis, the bank ‘rescue’ and rising unemployment, we were all a little more willing to spend, as well as use credit. Today, most of us are watching our money and looking for ways to cut expenses, just to make it from paycheck to paycheck. While the big banks are doing just fine, thank you, most people have suffered a dip in their credit score.

But really, the whole concept of the credit card is tipped to win for the company, not you. There is a reason why credit card debt is so easy to get in over your head with. To begin with, almost anyone is eligible for a credit card, unless they have some terrible credit history to their name. Card companies fall over themselves to set you up with more credit than you could ever afford, and promise to raise it all the time too.

Lenders and credit institutions try to assess each credit application by looking at the applicant’s credit score information. Through it, these institutions will be able to determine if an applicant is worth the risk. The credit score is obtained from information that is based on past credit activities of the applicant as well as other related information. All these can be found on the applicant’s credit report.

There is that episode in Everybody Loves Raymond in which a frustrated Deborah after being ribbed by her husband for being too anal about Credit Counseling, tells him to try it for a month if he thinks it’s so easy to pay all the bills and still have money enough left over to live on. What follows is a barrel of laughs as Raymond desperately tries to keep on top of everything, and even runs to his brother Robert for help with bills he can’t pay.

The reason that episode was such a hit was, it perfectly described the kind of situation a lot of us run aground on with their bills. The question is, once you do sense that you are a beached whale, how exactly do you extricate yourself and get back, doing the least possible harm to your long-term prospects – credit score, credit standing and so forth?