Using credit has become quite commonplace. However, so have credit problems. People often find themselves in so much debt that they cannot manage to get a financial foothold.

It is at these times that borrowers who are heavily in debt turn to the resources of credit counseling or credit repair services.  A credit counselor — a trained professional who helps people develop personal financial budgets and arrange programs of debt repayment — is assigned to examine the financial problem and provide suggestions to alleviate it. One source that borrowers can turn to is the Consumer Credit Counseling Service, which is affiliated with the National Foundation for Consumer Credit. This is a nonprofit organization with offices throughout the country. In addition to the NFCC, many banks, credit unions and community service organizations may also offer credit counseling.

It is important to note that many credit counseling services are for-profit organizations and often they are being financed by credit organizations. As mentioned in their book, “Planning Your Financial Future by Boone,” Kurtz and Heath, the authors suggest doing a little background work before going to any credit counselor.  

Due to overextending credit, poor health, or job loss, more and more people find themselves in financial trouble and need help in developing a repayment structure. Credit counselors are most eager to be of assistance if the problems are a result of health issues or job loss and not just careless spending. The borrower needs to make every effort to cooperate with the counselor and display sincerity in trying to develop a workable budget and a repayment schedule.  

It should also be noted that there are critics of credit counseling services. It has been observed that there are some clients of credit counselors who have ended up worse off after they have received help from these agencies. Some nonprofit credit counseling services may still charge high fees to clients (calling it a voluntary contribution) or steer clients to other for-profit companies. If a borrower contacts the creditor directly, often an arrangement can be set up that would benefit both the borrower and the creditor without needing the services (and fees) associated with a counseling service.  

The authors Boone, Kurtz and Heath specifically name “credit repair doctors” as little more than scams since they rarely deliver on their promises and may actually give “illegal” advice or advice that could lead to prosecution for fraud if followed. These “credit doctors” often claim that they can erase bad credit, create a new credit history or even remove bankruptcies, judgments, liens and bad loans from a person’s credit record. So it is really important to check out any credit counselor or service with the Better Business Bureau to determine if there is truth behind the advertising.  

Credit is a useful method of doing business but it must be monitored and used sparingly. If it is necessary to get outside help to fix a financial problem, make sure that the service is legitimate and the counselor is a true professional.

Mary Fox Luquette, MBA, CLU, ChFC is a finance instructor in the B I Moody III College of Business at the University of Louisiana at Lafayette.  

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