Credit Counseling Services are an option for solving their financial problems and to regain control of its economy. Learn what these companies, when it pays to have their services and what precautions to take before committing your finances. Never too late to reach the economic problems the life of any person. The accumulation of debts, the loss of his job, the result of an accident, lack of planning or ignorance of the financial system of this country are just a few reasons for the accounts to grow to overwhelm you.

In this situation, you may have found hundreds of advertisements on television and the press about companies that promise help managing your debts and assure you can get back the much desired financial freedom: the Credit Counseling and Credit Counseling Services. The idea that someone can guide you in handling your financial hardship does not sound too bad, but still, before taking any decision on how and to whom to entrust the management of their finances, learn about, especially when the controversy over interests with some of these companies is increasing.

What is credit counseling?, Worth When hiring your services?, Distrust When, What is the difference between counseling and debt management plan?

What is credit counseling?

“The credit counseling organizations that are an alternative for the consumer to manage their debt, guiding and providing resources and solutions, in order to regain control of its economy,” said Beatriz Mauersberg, financial education specialist with Consumer Credit Counseling Service, a company dedicated to educate and guide consumers in managing their debts.

The origin of these organizations goes back to the 30s during the Great Depression, when companies were born looking for a profit, negotiated with creditors on payment of a debt less than the initial one. During this time there were instances of abuse with clients, so many states had the need to ban this type of business and only allow those that operated without profit and actually work on solving the financial problems of consumers .

Later in the decade of the 50s, was born the second generation of counseling as a response to the rapid growth of unsecured consumer debt. “Many were organized by or with the support of creditors. During this same period, some states enacted legislation to regulate or prohibit the operation of the counseling agencies for profit, “said Robert M. Hunt, in his article “Whither Consumer Credit Counseling?” Published in the Business Review Magazine.

Today, these organizations are very strong and their service is done through three basic fronts:

• Advice: Tips for home purchase, mortgage modification, loan applications, among others.
• Financial Education: Educational programs and seminars, counseling, loss mitigation, loan types, etc..
• Debt Management: In depth analysis of their financial situation through the advice of private counsel, who later would try to negotiate their obligations to creditors with the aim of achieving a reduction or even elimination of overdue interest. The ultimate goal is to reach a payment agreement which you should be prepared to meet.

When is it necessary to attend a counseling company?

The finances of any consumer can always improve. So if in times of crisis you look for practical advice on personal finances, you may need to use one of these companies.

“You should see a credit counselor not only to solve their debt problems, but useful for learning about your personal finances. For some it is necessary for trading services and debt consolidation, while others may require only learn topics such as creating a family budget, the keys to buy housing, etc., “says Mauersberg.

To find out if your case is worth attending a counseling company, you can start with the following steps:

• Get your credit report and check your options.
This is the first step in knowing what state are your finances. Your credit report contains your personal data the way it makes payments and, in general, your credit behavior.

You can request this free report once a year via the Internet on page Annual Credit Report. With his paper could verify their information, protect against identity theft, mistakes and rebut the information base to negotiate with your creditors. However, if the debts are past the level of unmanageable and you feel that you have the clarity to know where to look for the exit, the recommendation is to visit a counselor.

• Try to negotiate your own debts with creditors.
Most companies will claim they can negotiate with your creditors and get interest rates are reduced, thus saving you money on your payments. While this is true, many did not make it clear that you yourself can do the negotiations by calling or submitted to its creditors.

However, if you feel unsure about how to make such requests and would prefer someone knowledgeable do it for you, it’s best to go to these institutions. In this regard, Henry Park, Norcross medical acupuncturist, one of the areas with more Hispanic residents of Atlanta, said: “In my practice many patients get sick because of stress to them to generate their debts and so my first advice is, together medical treatment, consult a credit counselor. I myself went to a credit counseling to prevent economic problems. There I said it could take some measures to save and also my mortgage debt negotiated with the bank to lower interest rates.

• Attend free classes in financial management.
The best way to prevent financial hardship is being educated on the financial system of this country and how to manage their money. In each state there are foundations or financial institutions that offer training, often for free.

One example is the Georgia Family Development Center, an institution in Atlanta, which offers free seminars on development issues for the community. In its most recent cycle of financial education topics were presented including: Developing a family budget, Guidance to prevent foreclosure, Understanding the credit system in the U.S., among others.

“This has been a great help to me, - said Margaret Cruz, one of the participants - with the poor economic situation here I found some tips to find solutions to the crisis, deal with my problems and know who to contact if require some specific advice.

Steps to get a reliable Credit Counseling

Although there are companies for which consumer welfare is very important as there are also those who seek only to financial gain. Therefore, when choosing your Credit Counseling consider these recommendations:

1. Know the difference between Credit Counseling and Debt Management Plan
A Credit Counseling helps consumers to find out how your credit management and tools for improvement. Only in very sensitive cases, counseling will recommend joining a management plan, with which they can consolidate their obligations and start a payment process.

2. Dude of the phrase “nonprofit.”
While there Credit Counseling claiming to be “profit” is more doubt about it, because contrary to popular belief, in this case the term does not always mean you do not wish to receive any profit. Although not all companies have to advise him to offer their services for free, if they have to be honest about how they get their profits. For example, an agency can not ensure saving money in negotiating with creditors, then client compromise long terms of payment and reap some benefits from these fees.

For cases like these, it is usual to find some concern about these companies among the majority of Hispanics are in America. Juan Mendez, a Colombian living in Georgia says: “Watching the behavior of some financial institutions in the country, nothing and no one is reliable, it is best that you yourself manage your own economy.” The key is that any doubt should ask a little more about him on the reputation of the company to which you intend to appeal.

3. Check the qualifications of evaluators of service companies
The Federal Reserve Bank of Dallas, in an article in his publication e-Perspectives, mentions some instances to test the seriousness of these companies: (1) the Internal Revenue Service’s Credit Counseling Compliance Project, which deals with abuses of these tax exempt companies, and
(2) the Bankruptcy Abuse Prevention and Consumer Protection Act, which establishes a certification program for these agencies.
They may also resort to the Federal Trade Commission (FTC), tax offices in each state and finally, explore other consumers who have already made use of services.

4. Recognize when it may be a scam
There are few cases where some councils have not been honest with customers and negatively affect your finances and your credit.

This is the case with Credit Solutions of America agency in Texas that has received more than a thousand complaints in less than 3 years for fraud to consumers by promising to eliminate unsecured debts in a very short period of time, so as not granting the 60% reduction that is proclaimed as part of the negotiation with creditors.

Because of this, the Texas Attorney General filed a lawsuit alleging that the company leads to an error in your offer their customers, what has caused increases in consumer debt additional interest and negative reports on their claims .

For cases like this, you should hesitate a counseling in situations like these:

• When you offer only a debt management plan without any counseling or financial education.
• Ensure that debt negotiation will not affect your credit report.
• Require payment of fees too high
• Require a percentage of debt that is successfully negotiated.
• Prevent direct communication with creditors.

If it is decided, start your credit counseling
If you took precautions and the organization selected to guide you in your task of consumer, it is time to begin counseling, although it is a very simple procedure will require the attention of their five senses, for no one but yourself knows financial history and the agreements which favor it.

1.For start call or go personally to the agency, which will be assigned an adviser who will be your guide throughout the process.
2.Gather documents require him there and talk to your case manager about your credit history, income, expenditure and level of its debt. With this information you may choose to require a debt management plan, or only financial education.
3.Si want to consolidate their debt and join a payment schedule, your budget will move into a matrix designed by the agency, which will calculate the value of the monthly fees you will pay.

Manage your credit and be victorious with debt can be easier than you think if you are clear about how the credit system, how to conduct their debts and of course, when and to which entities to go for expert advice.

“This article was developed and published with support from the International Center for Journalists (ICFJ).

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