What services do credit counselors offer?
SAN JOSE, California, March 30, 2021 / PRNewswire / – Nonprofit credit counseling agencies offer a wide range of services to consumers looking to improve their financial situation. Whether you are struggling with credit card debt, student loans, need help setting a realistic budget, or want to buy a home, there can be free or low cost programs out there. The following is what you need to know about credit counseling and how to access it from myFICO.
For more information on loans and credit, visit the myFICO blog at https://www.myfico.com/credit-education/blog
Credit counselors can be certified and specialize in different areas, and agencies can offer a variety of services. While credit is in the name, not all of them focus on your credit reports and FICO scores. The most common services can help you:
- Create a realistic budget: Work with a credit counselor to review your income, debt, and create a workable budget. These are often one-on-one sessions and a popular way to get started with credit counseling.
- Work on your credit: If you want to work on your FICO scores, a credit counselor can review your credit reports before explaining what is impacting your credit and offering you personalized advice. More 100 consulting agencies are part of the FICO® Score Open Access for the Credit and Financial Advisory Program, which allows advisors to share FICO scores with their clients for free.
- Pay off credit card debt: One of the main services offered by many credit counseling agencies is a Debt Management Plan (DMP) for people struggling with unsecured debt (mainly credit card debt). The credit counselor can negotiate with your creditors and potentially get fee waivers, update overdue accounts, and lower your interest rates or minimum payments. You will then make a one-time payment to the credit counselor, who will distribute the money to your creditors. Generally, a DMP leads to repaying debts within three to five years.
- Understanding and declaring bankruptcy: If you’re in debt and can’t see a way out, an advisor can walk you through the bankruptcy process and give you some advice. Additionally, to start and complete a bankruptcy filing, you must take pre-bankruptcy and debtor education courses from a counseling agency that is approved by the Office of the US Trustee.
- Benefit from homeownership assistance: Credit counselors can also provide several homeownership-related services, such as programs for first-time homebuyers. The US Department of Housing and Urban Development (HUD) sponsors consulting agencies who offer reverse mortgage and foreclosure avoidance advice.
- Manage your student loans: Get help understanding your options for federal and private student loans, including forbearance, deferral, forgiveness, and income-tested repayment plans.
- Improve your financial education: Additionally, many consulting firms offer free educational material including guides, interactive tools, and webinars.
While an initial introductory call or debt and budgeting session may be free, other services often come with a fee. However, the fees are generally low and can sometimes be waived depending on the customer’s financial situation.
Who Should Work With A Credit Counselor?
People often turn to credit counselors when they are having trouble with their finances. Maybe they’re struggling with credit card debt or just don’t know how to handle their loans. Or, they are considering filing for bankruptcy or getting a reverse mortgage and may need to meet with a credit counselor to complete the required courses.
However, there is no income requirement – you could make six figures and still be overwhelmed with debt and seek help. You don’t necessarily have to struggle to benefit from it, either. Asking a certified counselor to review your finances and credit for personalized advice could be a preventative measure that will help you be successful.
Will credit counseling have an impact on my FICO scores?
The fact that you are working with a credit counselor can be reported to the credit bureaus by a lender. This scoring itself will not impact your FICO scores. However, if arrangements are made with a lender where a portion of what you owe is reduced or eliminated, that “partial payment settlement” will likely be reported to the credit bureaus and is considered negative by a FICO score.
Closing credit card accounts can also negatively impact your scores.
How can I find a reputable credit counselor?
Some credit counseling agencies focus on working with clients in a specific city or region, while others offer assistance nationwide. Depending on the agency, you may be able to work with an advisor in person, over the phone, or online.
You can start by searching for an agency that is part of the FICO Open Access program (like Operation Hope) or a member of National Foundation for Credit Counseling Where Financial Advisory Association of America. In addition, nonprofit and government organizations, including universities, credit unions, and military bases, can offer credit counseling services to members. It is important that you do thorough research on these counselors before signing up for their services.
Although most reputable credit counseling agencies are non-profit, you should always be wary of counselors who push you into a program or charge you high fees. Use the first meeting or introductory call to determine if the advisor is right for you or if you should look elsewhere.
myFICO makes it easier to understand your credit with FICO® Scores, credit reports and alerts from the 3 bureaus. myFICO is the consumer division of FICO – get your FICO scores from the people who do the FICO scores. For more information, visit https://www.myfico.com.