The Truth about Credit Counseling Agencies

Credit counseling agencies, debt relief services, consumer credit help--these are but a few of the names that companies claiming to help consolidate consumer debt go by. As a former mortgage and credit specialist, I've had an up close and personal view of how consumers turning to these companies for help can also receive a big fat mortgage denial.

Why?
The answer is rather simple. A lender or a creditor gets an uneasy feeling when they see that you couldn't manage your finances on your own, but had to turn to a "credit counseling" agency to do it for you. Lenders would rather see that you took control of the situation yourself and took the steps necessary to get out of debt on your own.

The truth is that everything you can pay a credit counseling agency to do for you, you can do for yourself. Yes, it will take some of your time, but you put yourself in debt so it is your responsibility to get yourself out of it too.

Take Control

First, contact each of your creditors and lenders. Explain you're having problems paying your bills but you want to work out an arrangement that is mutually beneficial. Most companies would rather work out a payment arrangement than not get paid at all, so you may be surprised at how many of your creditors work with you.

Second, get all of your agreements in writing. Get the name and contact information for the person you speak with at each lender. Follow-up your phone call with a written description of the agreement. Most companies will send you something more formal via email or in the mail, but you need to be proactive about the situation and document everything.

Stick to it. Once you establish an arrangement with your creditors, make sure to hold up your end of the bargain by making the agreed upon payments and making them on time--always.

Credit counseling agencies saw a need (or more of an opportunity) in the market to make money and they took it. Working with a credit counseling agency can solve your debt problems in the short-term, but can be damaging to your ability to obtain new credit in the future and in the long-term. Avoid this problem by acting as your own credit counselor. It resolves your debt problems and shows creditors and lenders that you are in full control of your finances and you have the ability to manage your own finances.