Do I Need Credit Counseling?

Some consumers are unsure when to seek out the services of a credit counseling agency. We'll explain how to tell if you need credit counseling here.

Assessing Your Needs

As the demand for credit counseling has grown over the years, the industry has begun targeting consumers who don't really need the service in the first place. In the past, credit counseling services were reserved only for consumers who were seriously behind on their payments and possibly in danger of bankruptcy. Now, however, credit counselors even target debtors who are simply unhappy with their interest rates. If you want to find a credit counseling agency just because your interest rates are too high, you might not reap the full benefits of the service. Some types of credit counseling may even end up harming your credit score. If you would like better interest rates, try calling your creditors yourself to negotiate instead of pursuing credit counseling unnecessarily.

The Danger Zone

If you can pay all of your bills every month and are not behind on any of your accounts, you probably don't need the assistance of a credit counseling agency. However, you might need credit counseling if:

• You are late regularly on one or more of your accounts
• You can't afford the minimum payments on your credit cards
• Creditors and collection agencies are badgering you for payment
• Your attempts to negotiate a workable repayment plan with your creditors have not succeeded

Keep in mind that a credit counseling agency may not be able to help you if your debt troubles are too severe. Creditors may have some flexibility with interest rates and settlement amounts, but they do have their limits. Given that fact, consumers with prodigious amounts of debt and/or serious delinquencies should consider bankruptcy instead of credit counseling.

The Length of Your Repayment Plan

One way to determine if you should pursue credit counseling or bankruptcy is to ask your credit counseling agency how long repayment would take. Most financial experts advise consumers to limit their repayment plans to two to four years. If your proposed repayment plan takes five years or more, you are probably a better candidate for bankruptcy. A protracted repayment plan only lowers your chances of success; only 50% of consumers successfully complete their debt repayment plans, according to the National Foundation for Credit Counseling. For more information about credit counseling, check out the things you need to know.