How to find out if you're a good candidate for credit counseling
Getting a Reluctant Spouse to Consider Credit Counseling
by Dollar Stretcher Contributors
Getting a Reluctant Spouse to Consider Credit Counseling
I recently read somewhere in your newsletter that if you don't think you can reasonably pay off your credit card debt in the next three years, you should consider getting professional debt help. I showed the article to my husband since we do have quite a bit of credit card debt that I doubt can be paid off in three years. I suggested that we look into credit counseling. He is extremely reluctant to even contact an agency for information. We are in complete agreement that getting into debt was a joint effort and getting out should be the same, but we seem to disagree on the best way to do it. He is concerned that if we use a credit counselor, it will hurt our credit scores, or if we decide not to use them, we will continue to get pestered with "sales calls." He is a very proud man, and I know asking anyone for money help is likely hard for him. I just worry that one or two more unexpected bills could put us living paycheck to paycheck or worse. Have any other Dollar Stretcher readers gone through credit counseling who would be willing to share their experience? I know everyone's financial situation is different, but it would be nice to hear from others on what to expect from credit counseling. Thanks in advance!
R. from California
Making This Hard Personal Choice
If you are paying the minimum payment each month, you will be paying for a long time. As for credit counseling, many charge a fee. The creditors will work with them and sometimes agree to take less than the full amount. You will need to cut up the cards. Here's the catch. This will go on your credit and stay on for the next seven years after the date of the last payment. With bankruptcy, it stays on your credit ten years after the discharge date. It's a personal choice.
Either Now or Later
I was in a similar situation several years ago. We did go to a credit counselor. We were able to get good ideas. I remember getting our interest rates reduced, consolidating the cards, etc. We did not have to use them since a family member was able to lend us money.
I would suggest making an appointment and going from there. It seems to me that counseling should be in order or you will find yourself in the same position in the future. Human beings are creatures of habit. Unless these habits are broken, we do the same things again and again.
DIY Debt Freedom
We got rid of our credit card debt by paying as much as we could on the smallest balance. Then went to the next one, using what we were putting on the smaller one plus the payment we had been making. We paid off the smallest each time. Within a year, they were all paid off. Then we put the amount we had been paying on the cards onto our car and then our home. We finally arrived at being totally debt free. When we were debt free, we put the amount we had been using to pay off our debts into savings.
As the end result, we now pay cash for our cars and have emergency money saved. If we use a credit card, it is paid off within 30 days. It is a good feeling.
Call the Credit Counselors
This is absolutely imperative. I called them, due to stupid decisions I made when I was younger. It was one of the best calls I ever made. The first question I asked them was "Will this prevent me from getting approved for a car loan or lower my credit score?" Both of those issues were very important to me. The answers were "no" and "temporarily," respectively. They made all the payment arrangements with the cards I owed money, and the only thing I had to do was call the companies and close the accounts. Also, I just paid one bill a month directly to the agency I signed up with, and they disbursed the payment to each creditor (minus a small fee).
Generally, the way it works is the agency will arrange with the creditor a lower rate, which the company is willing to give because then they still get their money rather than facing a possible discharge under bankruptcy. Often the payments are lower as well. Since the account is closed, you can't charge any more, and your balance will go down. I paid everything off in about three years. Today I have one credit card (which I pay, in full, every month) and zero debt. My credit score is immaculate (over 800!) and I'm still thankful that I called and arranged the counseling. Just make sure you choose a reputable company to call before you do this. Do a little research on the internet or talk to someone who can recommend a good company. You don't want a fly-by-night or you may end up in worse debt!
Go With Non-Profit
If you do go with credit counseling, make sure they are non-profit. Otherwise, any amount that is written off will be considered income. Also, check out Mastering Your Money on Bankrate.com.
Take a Different Approach to Debt
Debtors Anonymous is a 12-step group that has helped many people get out of debt. It is free and anonymous and has online help.
Reviewed January 2018
Take the Next Step:
- Am I a good candidate for credit counseling?
- Is a personal loan my best option for getting out of debt?
- Use these tips to stay motivated to dig yourself out of debt.
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