How Credit Counseling Works - A primer

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How To Fix Your Credit Quickly
To damage your credit is just too easy, some people don't have any idea of the implications involved in credit and how it works. When you apply for any type of financial product on a large scale then you will most likely be on credit for that product whether it be a mortgage or loan. The problem is that even the smallest things can damage your credit to extreme lengths, from late payments to misse... Read credit counseling article



Understanding credit counseling
Many of us have seen the advertisements on television. "Get out of debt fast!" "We can solve all your credit problems with only one call!" These sound really great but you know that, realistically, one call is not going to solve your credit problems.

If it were so fast and easy to get out of debt the credit card companies and these agencies advertising on television would be out of busi... Read credit counseling article



How Credit Counseling Works - A primer
The consumer credit counseling business is a huge industry in America, since the average American is a mere three paychecks away from facing huge, potentially devastating financial difficulty. Each year, more than a million Americans turn to credit counselors to try to help themselves regain control of their financial burdens. But just how the credit counseling business works is a mystery to most consumers. What's involved when you hire a credit counselor?

It may come as a bit of a shock, but the first thing you need to understand is that consumer credit counselors don't work for YOU! That's one reason their ads on television, radio, and in your email box shout, "Our services cost you nothing!" However, any business needs to derive income from somewhere, so if they're not charging you, who does pay them? In truth, they work for the lenders. Here's how it works:

Regardless of what their commercials would have you believe, credit counselors don't renegotiate the overall amount of your debt--that is, the total principal balance you owe to your creditors. Instead, they negotiate with the various lenders to decrease your interest rates. For instance, let's say that you're paying somewhere around 18 percent on the charge card you want help with (some stores still charge as much as 21 percent). A credit counselor will contact the cardholder and negotiate a lower interest rate--sometimes as much as half the original rate.

That's the good news. The not-so-good news is that your minimum payments will still be based on a 90/10 split, meaning that 90 percent of your monthly payment will still go toward paying interest on the card. That means, as is the case with any credit card payment, it will be well worth your while to pay a little more than the minimum each month, in order to whittle down your principal. It will save you significant amounts of money in the long run.

But how can credit card companies continue to make money by cutting interest rates in half, and what do they have to gain by doing so? The first reason is because they know that it's better to get something, which they'll do if you continue to pay them, even at a reduced interest rate, than to risk having you default on the entire amount. The second reason is because, even at the reduced rate, the lender is still making a healthy profit. They have borrowed that money at a significantly lower rate--sometimes as much as 66 percent less than the rate they'll be charging you. (That's why the financial institutions have big buildings; they make huge amounts of profit.)

Credit counselors CAN save you money, there's no doubt about that. But don't be fooled into thinking that they work for YOU, because they don't. In the end, credit card companies love credit counselors, because the counselors truly work for them. That's why you don't pay for credit counseling services. The credit card companies are happy to pay them for you.

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Signs you might need credit counseling

Most families in America today have a credit card; some have two or more. The type of credit card you own, gold, platinum, ext, is almost a status symbol in society. The concept is a good one, using your good credit to purchase big-ticket items that you may need time to pay for. If used wisely, credit cards can be a dependable resource, however, sometimes we are unaware of the fact that we are overspending. Some may think that if they are able to make the monthly payments, then their debt is under control. This is not always the case. These are some signs that you may be in or going in the direction of having a major financial crisis.

* You use your savings to pay monthly bills.

* You pay only the minimum monthly payments on any of your credit cards.

* You take out cash advances to pay your credit card bills, or other bills that you may have.

* You are over or nearly over your credit limit on one or more credit cards.

* You have been turned down for loans.

* You receive calls or letters from collection agencies.

If you think that you may have a debt problem, there is help. Credit counselors are trained to help you get out of debt in a very short period of time. Some can even help to make you debt free in as little as 18 months. Your individual situation may take more or less time. Even if you have good credit but have made unwise choices while using your credit card and you want to preserve your good credit, you mat benefit from credit counseling. Many credit counseling agencies will provide you with a free debt analysis to help you understand what actions that you can take to reestablish your credit without bankruptcy.

Timothy Gorman is a successful Webmaster and publisher of Debt-Relief-Solutions.com. He provides more debt relief, consolidation and credit counseling information that you can research in your pajamas on his website.




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How Credit Counseling Works - A primer
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