Credit Repair: Non Profit Credit Repair Counselors

Non-profit credit repair counselors can be a lifeline for consumers who are struggling with excessive debt load.

Even with the best intentions, it is easy to find oneself in debt. Many people opt for bankruptcy, but there is another solution, and that is the non-profit credit repair counseling service. These agencies were established in the mid-sixties as an answer to the rise in consumer debt spawned by the increased availability of store credit and bank credit cards. Unused to being able to buy items on credit, consumers began to abuse the privilege and, as a result, found themselves in debt, many for the first time in their lives. The non-profit credit repair agencies became a viable alternative to bankruptcy. Today, these agencies are still helping consumers to avoid bankruptcy and repair their credit.

A non-profit credit counseling agency works with the consumer in a number of ways. During the first appointment, the counselor reviews the consumer's financial condition, examining liabilities, income, and assets. They will obtain a credit report and review all the information with the consumer. From the initial meeting, the counselor usually can determine whether or not the agency will be able to assist. In some cases, the consumer's level of debt is so extreme that bankruptcy is the only answer. In others, the consumer does not have a steady source of income and would not be able to guarantee payment each month once payment arrangements have been made. Because the consumer's creditors pay these agencies, there is no incentive to work with someone for whom repayment arrangements are not feasible.

Once the counselor has determined whether or not the consumer can be assisted by the agency, the next step is to contact all of the consumer's creditors and negotiate lower monthly payments and, in some cases, lower interest rates. Often, the counselor is also able to eliminate late fees and fees charged for exceeding a credit card's limit. Once the agency contacts the creditors, the consumer should at least find some relief from bill collectors' phone calls and reminder notices.

After the counselor has contacted all the creditors and makes repayment arrangements, the consumer is given a complete forecast indicating the amounts owed to each creditor, the monthly payment each creditor will receive, and the length of time it will take to pay off each individual debt. He or she will also be provided a repayment schedule that includes a monthly amount to be paid directly to the counseling agency. From this amount, the agency will make the consumer's monthly payments, on time, and regularly. As long as the consumer makes the monthly payments to the agency, the bills are paid, and his or her credit is slowly rebuilt. Of course, if the consumer misses payments or is no longer able to meet these obligations, the arrangements become null and void, and the onus returns to the consumer.

Besides working with a consumer's creditors, the non-profit consumer counseling service will also work with the consumer in planning his or her financial future. This can include establishing savings accounts, investment counseling, and education regarding the use of credit. Many people will consult a credit repair counselor with the ultimate goal of being able to qualify for a mortgage. The fact that a consumer has taken the initiative to handle his or her financial situation voluntarily can be a plus when a lending institution considers whether or not to lend money for a home. Late payments are always regarded more positively than bankruptcies, no matter what the situation.

Before consulting a non-profit credit repair counselor, it is important to do some research. Make sure that the agency is non-profit, and never sign up with an agency that charges an upfront fee. Remember, even though the agency is making the payments, you are ultimately responsible for these debts, and, if they are not paid according to the plan, you will be liable.

Additionally, because these agencies do not normally charge a fee to the consumer and are supported by payments from the creditors, they normally will not handle repayments to state and federal governments for taxes and student loans. They may also refuse to handle and debts currently being handled by collection agencies. On the other hand, enlisting in a repayment program will often be enough of an incentive for creditors to stop foreclosure proceedings and other extreme collection attempts. Becoming aware of one's financial health can also prevent future credit problems.

Credit repair is a buzzword in today's economy and the non-profit agency can be a lifesaver for those consumers who are overwhelmed by their debt load. It may not be the answer for everyone, but it is certainly one worth considering no matter what your situation.

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