The ABCs of CCC

Written by Brett Bruce

Credit counseling has become a part of our culture. You can’t turn on a television or radio program without finding an ad for this service. However, it may not be the best choice for you.

Here’s how it works. You arrange an appointment with a credit counselor – either in person or on the telephone. The credit counselor works with you to create a payment arrangement. You give your payments for your credit cards directly to the counseling service and they distribute the money to your creditors. This service usually has a minimal cost, such as $25 to set up your account and a monthly service charge that’s even smaller.

What they tend not to tell you is that when you use consumer credit counseling services, that information will go on your credit report. You’re also lose your ability to put more charges on the accounts that you include in your counseling program.

Your credit report will reflect that you received services from a debt counseling program for as many as seven years – similar to a bankruptcy. This can be a red flag to possible creditors in the future.

These services are nonprofit, but that doesn’t mean they don’t make any money. In fact, they almost always receive a percentage of the fees they collect from the creditors themselves.

While there are some definite disadvantages, there are some good aspects about it. For example, credit counselors can often arrange for creditors to stop adding interest and other service charges as long as you’re making payments on time. They can also help you to get your debt completely paid within a three year time period for most people.

Other than debt management programs, consumer credit counseling offers some other valuable services. Whether or not you go for credit counseling, you can take advantage of their educational services.

You can often attend free workshops on budgeting, credit management, and other topics such as preparing to purchase a home. They even offer courses for kids on how to manage money.