When To Seek Help From A Credit Counselor

This is a guest post from Kevin is the co-founder of DebtEye and the author of Debteye’s blog.

If you’re buried in credit card debt, it’s important not to make hasty decisions.  Your decision can be based on fear and helplessness, and this can lead you to being worse off than you currently are today.  Having a clear roadmap of how you’re going to get out of debt will help you think logically before you need to seek professional help.

As a credit counselor, I’ve been able to pinpoint some of the most common reasons why people get into debt.  When you talk to a credit counselor, they will set you up on a Debt Management Plan (DMP) to lower your interest rate and payment.  All your credit cards will be closed, and you will have a notation on your credit report stating that you’re in a credit counseling program.  Although this notation does NOT affect your credit score, some lenders might look at this negatively.  Here are some things you can do before you seek professional help:

  1. Spending Journal– Most people end up in debt because of poor financial management.  Simply put, they spend more than they earn.  How many of you actually started a spending journal?  I challenge you to start one for only 1 month.  Write down every single expense (even the .50 soda) for one month, and I guarantee you that you’ll see areas of improvement.  Most people are able to save around $75/month just by spending money wisely.
  2. Reach out to your creditors – Did you know that most credit card companies are offering more internal hardship programs?  The best part about it is that you don’t have to be behind on your payments to qualify.  Most creditors might offer a short term assistance (<6months) to lower your interest rate, and this does NOT affect your credit score.   It doesn’t hurt to ask for a credit card repayment plan right? 
  3. Cut Your Cable Bill Your cable/internet bill is category where you can instantly reduce with one simple phone call.   There are tons of free services online where you can watch your favorite TV shows and movies.  Having premium channels is a luxury that can wait after you’re debt free.  Netflix has instant streaming for $7.99/month and depending on your current cable bill, this might be a bargain!

If you still can’t manage your credit card bills after you’ve done everything possible to reduce your spending, you should consider speaking with a credit counselor.  They will most likely put you on a Debt Management Plan, and your creditors will agree to lower your interest rate.  You can expect your new interest rate to be around 0-11% depending on who your creditors are.   Here’s how to choose a reputable credit counselor:

  1. BBB Accreditation- Most credit counselors will be accredited with the BBB.  Check your state’s BBB website to make sure there are not a lot of complaints.  If you find complaints (which is bound to happen), check to see if they were resolved.
  2. Sales Tactics– Most credit counselors have a “no sales approach.”  Their job is to educate you on financial literacy and help you make the right decision.  If you find that your credit counselor is being overly aggressive on getting you signed up, this should raise a red flag.
  3. Enrollment Fees- Most credit counselors don’t charge more than $50 in enrollment fees.  You can expect your fees to be around $20-$30 on average. 
  4. Transparency- Make sure that the credit counseling company discloses ALL their fees.  Typically there is a monthly maintenance fee which shouldn’t exceed $20/month.  Are there any NSF fees and what’s their cancellation policy?

Credit counseling is a viable option for those who are struggling with their credit card payments.  However, there are certain steps you can take before you seek professional help.  If you have a clear roadmap of how you’re going to tackle your debts, this usually solves the problem. 

Author Bio:  Kevin is the co-founder of DebtEye and the author of Debteye’s blog where people can get free unbiased financial advice.  He is a certified credit counselor with the NACCC.

2 thoughts on “When To Seek Help From A Credit Counselor”

  1. I like this explanation of what a credit counselor can do for people. They offer an excellent service but unfortunately they are mostly called upon for remedial reasons. A little proactive planning can save a lot of heartache.

  2. I find cutting your cable bill the most interesting on this list. I would have thought to get rid of my credit card or pay off those debts first. I think everyone should meet with a credit counselor at least once. There is a lot of advice they can give you. In this country we spend a lot and because everything is electronic, it can get really difficult trying to manage money responsibly.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.