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Credit Counseling, Debt Management

5 Myths About Credit Counseling

By Guest Blogger | Friday September 9th, 2016

Steve_Nitz By Steve Nitz

NFCC member agencies provide financial education to millions of consumers each year. These appointments can be either in person, over the phone or online. However, there’s a good amount of the country’s population that’s afraid to schedule a counseling appointment due to a number of misconceptions.

Here are five myths about credit counseling, debunked:

I. Credit counseling will hurt your credit score

Possibly the biggest misconception when it comes to financial counseling is that people think consulting with an agency can impact your credit score. However, that is not the case at all. Your credit score is based off of the information contained in your credit report. Having an appointment with a credit counselor is not reported to a credit bureau and therefore has no effect on your credit score.

2. It’s expensive

The price of credit counseling depends on the support for each member agency as well as state laws. The majority of services are provided at little or no cost to clients. NFCC’s Member Quality Standards state that member agencies will not discriminate based on financial status.

3. Your situation is beyond repair

If you have severe debt, there are options to repair your situation. A good solution could be a debt management plan, which is a way to pay your debt through monthly payments to a credit counseling agency, who will distribute the funds to your creditors.

With a debt management plan, a person can benefit from reduced or waived finance charges, fees and fewer collection calls. After your payments are completed, the DMP could help you reestablish your credit.

4. Credit counseling can fix your credit report

Just by itself, meeting with a credit counselor does not impact your credit report. However, credit counselors will provide advice on things such as budgeting and financial education, and could get you enrolled in a debt management plan. These in turn will help your credit report, but in the end it’s up to the consumer.

5. Credit Counseling won’t stop legal action

That’s actually not true. In most cases, NFCC member agencies are able to work with creditors to stop legal action, as well as develop a solution that will satisfy each party.