For some consumers, the conditions of their lives have improved the point where they are able to find themselves on a more stable ground financially but there are still countless men and women who are struggling to avoid delinquency or the need to file bankruptcy due to the fact that their personal debt obligations have become so overwhelming that they can no longer meet payments from various creditors. However, this is where some men and women may look to credit counseling assistance as a way to avoid delinquency on these obligations and hopefully avoid bankruptcy in the long run despite the fact that they are having trouble paying for debts like mortgages, loans, or credit cards.
What some consumers have often made the mistake of doing is not fully understanding what these debt assistance plans could entail due to the fact that credit counseling can lead to subsequent debt relief programs which may not be best for some consumers. Also, there are questions as to whether credit counseling can actually hurt a consumer’s credit score, and when it comes to the various aspects of debt relief through credit counseling services, there are different opinions as to what will potentially harm a consumer’s score but there is a consensus that some programs do indeed cause a financial setback in the lives of these consumers seeking aid.
Essentially, nonprofit credit counseling will begin with a consumer simply talking with a credit counselor who has reviewed their financial situation and may have suggestions for how they could potentially save more money, eliminate certain costs, and meet their debt obligations with their current income. Credit counseling is no guarantee to solve a consumer’s problems, in that there are some credit counseling agencies that may charge a fee for their services, but consumers who are at a loss of where to turn have often research online for reputable counseling assistance options in their area as there are many accredited agencies that can offer advice to a variety of consumers in need.
A counseling session alone is not going to reduce a consumer’s credit score due to the fact that this will obviously not be reported on a consumer’s credit history, but when consumers move into areas like debt management or debt settlement this can impact a consumer’s financial life in different ways. There are those who argue that if a consumer has become so delinquent on their debts they may be in a better position to file for bankruptcy rather than pursue debt relief options that go beyond credit counseling, but there are also those who argue against this idea.
While debt management and debt settlement are quite different they can impact the consumer’s credit score but it will depend on the situation, a consumer’s various creditors, and what agreement is worked out as to whether it will be severe. Yet management is usually a plan worked out between creditors and a counselor that will allow a consumer to pay lower monthly payment obligations on debts, which will eventually be paid in full, and some consumers may see decreases in their credit score in this area as a result of closing credit card accounts, as an example, but many advisers often point out that consumers who turn to debt management may show future lenders that they are willing to honor their debts no matter if financial trouble arises, and this could be a positive for some.
However, when debt settlement enters the picture it could do damage to a consumer’s credit score simply because it’s settling one’s debts at less than the original amount owed, and this would obviously look poorly on a consumer’s credit history. Yet, consumers who act quickly when they fear that delinquency may arise or that their situation could deteriorate to the point where bankruptcy will be required may find that by taking action early through either talking with creditors or credit counseling agencies, these consumers could potentially avoid financial distress that goes beyond what they are currently experiencing. It must be remembered though, credit counseling will not help everyone and is a personal decision that a consumer has to make, so a great deal of forethought and research needs to be done on the part of the consumer to address their personal financial struggles.