Have you ever taken out a loan? If so, you know exactly how hard it is. It would seem that all you have to do is choose the most favorable loan terms. But in reality, everything is much more complicated:
- You have to div out what kind of loan is best for you;
- You need to know how much money you can borrow and for how long;
- You must make a plan for repayment of the loan, according to your expenses and income;
- You must pay it on time despite unexpected financial difficulties.
Imagine how much calmer your life would be if there were someone who could help you do all these steps correctly and reduce your financial stress. Well, such a person exists, and his service that will help you solve all of the above issues is called credit score counseling.
In our opinion, this service is a must for anyone struggling with loan payments, wanting to consult with an expert before borrowing money, or looking to be more financially literate. Let’s understand in more detail what credit score counseling includes and how it can help you.
Best Credit Counseling Services
Over half of Americans have had debt on their credit cards in the past 12 months. More than 35% of these people can’t manage to pay off debt on their own because they have trouble managing their finances.
Even more, Americans often get into financial trouble because they don’t understand how to choose the right loan. Usually, borrowers find it difficult to understand all the details of a loan, so they get money at high-interest rates for an unprofitable term with many hidden and additional fees.
To not be among these people or become someone who manages his money wisely and has low financial stress, you can contact counseling agencies that provide credit score counseling. We have analyzed the offers of dozens of such companies and selected only 5 of them, with the best terms of cooperation and customer reviews.
Cambridge Credit Counseling Corp.
If you live in New York, this is the company to contact. It is accredited by the Financial Counseling Association of America and a National Foundation for Credit Counseling member, proving its reliability and staff’s expertise.
Here, you can receive credit score counseling services free to find out your problems and how best to fix them. However, if you like the first consultation and want to work with a financial expert further, you need to pay a $40 initial fee and then about $30 monthly (the exact price depends on the state).
Customers are very optimistic about Cambridge Credit Counseling because the non-profit organization has helped hundreds of thousands of people repay their loans, reduce financial stress, and avoid bankruptcy in the last 26 years. Besides, they note the availability of valuable lessons and additional materials on financial literacy, the professionalism of the company’s employees, and excellent results of cooperation with it.
Money Management International
The main advantage of this counseling agency is that it has physical offices in 25 states. Established in 1958, this organization is one of the most popular in the United States.
If you apply to Money Management International for credit counseling, you do not have to pay anything – the first session lasts 45-60 minutes and answers all your questions. However, if you like working with advisors and want to turn to them for specific services, such as drawing up a debt management plan, you will need to pay initial and monthly fees. The fees depend on your situation and state, but they cost less than $50.
It is important to note that this counseling agency is a member of the National Foundation for Credit Counseling, which confirms its reliability. We can also know from customer reviews about the effectiveness of the company’s staff – many clients have written that they were able to reduce the rate on their loans by 10-20 percent in just a few months. In addition, many successfully repay their loans despite a difficult financial situation and low income.
InCharge Debt Solutions
The Florida-based organization has helped over a million people pay off their debts through credit counseling and debt management plans in its 25 years. Its main advantage, as noted by its clients, is its online customer portal and mobile app, where you can monitor your finances and see your repayment plans from anywhere in the world.
The first credit counseling appointment at this nonprofit is free. It is a National Foundation for Credit Counseling member accredited by the Council on Accreditation. If you want to use the company’s fee-based services, you will have to pay a down payment of up to $75, depending on your state of residence, and a monthly fee of $33.
GreenPath Financial Wellness
Founded in 1961, the nonprofit organization has its mission to help millions of people across the United States pay off their debts and learn to manage their finances without additional stress. Today, it has 28 offices in more than 20 states and mobile and online credit counseling available nationwide.
If you’re not sure what kind of service you need (housing counseling, debt management plans, or others), you can take a free 3-minute assessment where you’ll understand what type of help is right for you. Next, you will have a free consultation for your chosen format, and only after that will you be able to select the services for which you will be charged.
One of the advantages of GreenPath Financial Wellness is that you may even get debt management plans free of charge. Depending on your situation and state, the initial fee will be $0-$50 and a monthly cost of $0-$75.
GreenPath Financial Wellness has an online portal to help you track your progress and financial situation 24/7, as well as lots of free money management materials. For example, there’s a credit calculator, worksheets for managing a family budget, and guides for various situations.
The last of all counseling agencies in our ranking, we decided to mention Apprisen because it offers many free and effective debt management tools. For example, on its online platform, you can enter basic information about your financial situation and get an action plan to help you reach your saving goal or negotiate debt settlement in a short time frame free of charge.
And if you want help from a live counselor, you can go to one of the agency’s 12 offices or use their online user portal. The organization has been providing credit counseling for free since 1955, but if you want to get paid help, you’ll have to pay a one-time fee of $45 and a monthly fee of $45.
Users of the platform say that Apprisen helps to repay loans and generally improves your financial management skills. For example, a financial health program that includes an annual checkup on your situation, a savings plan, and on-demand coaching has helped tens of thousands of Americans reduce financial stress and avoid using credit as a long-term solution.
What is credit counseling?
To answer this question, we need to imagine a typical situation. For example, you want to buy a car, pay a home loan, or improve your credit rating. Of course, you could do it yourself, but it’s hard to research all the possible solutions on your own; we often miss some crucial details and make the wrong financial decisions.
If you go for credit counseling, however, you can be sure that you will know all the options to solve your problem and choose the best one. For example, you can buy a car for cash or calculate with an advisor that it is better to invest the same money in a small property, the income from which will cover the payment on the car loan. This way, in 5 years, you will have a car and real estate that brings income, while the initial amount of money remains the same.
Or you have a house loan to pay off and want to do it as fast as possible, but you don’t know how because your income isn’t increasing. A financial advisor can help you find a bank that will refinance your loan, lower your interest rate by 10-20%, and your monthly payment. This way, you can pay the same amount of money on your loan as you did before; only now will you pay it off faster.
Typically, a credit counseling session lasts only 45-60 minutes and can be offline or online. You can get this service for free at many non-profit organizations. It often consists of several steps:
- First, you talk about your goals, such as debt settlement or building savings.
- Then you share your financial situation and tell them how much income and expenses you have, what credit you have, and what your credit score is right now.
- Your counselor analyzes your entire situation and tells you the best way to reach your goal. He doesn’t prescribe a step-by-step plan for each month because this kind of work takes days, but he points you in the best direction to solve the problem.
After that, you have two options: you can act in the direction indicated by the counselor on your own, or you can ask him for further help. If you choose the second option, you agree to the monthly work and get a reliable assistant by your side who is always ready to offer you the real opportunity of achieving your goals, increasing your credit score, and paying off your loans.
Does counseling impact the credit history or credit scores?
Understanding that credit counseling does not affect your credit score is essential. At this stage, you go to a financial expert for advice, often without even going to the banks or touching the money; you just talk and find a solution.
However, at the same time, if you decide to take the advice of an advisor, you may be doing some things that will affect your credit rating in the short term.
First, let us reassure you that if you need to pay off a lot of debt and do it as soon as possible, a slight drop in your credit score is not a significant problem. Things will recover over time, and your credit score will eventually increase through sound financial decisions.
What exactly can affect your credit history? For example, refinancing a loan can do it. If done right, this is an excellent financial decision when you pay off old debt (or several) with a new one. This way, you can lower the rate on your loan by 10-20% and improve your situation.
In the short term, this action can lower your credit score. However, it is essential to understand that reducing your rate will help you make regular loan payments, which are 30% of your total score, which means that in the long run, you will increase it on the contrary.
In conclusion, don’t be afraid to take action that is coordinated with your counselor. You can ask him to warn you about all the consequences, but always keep your priorities in mind – it’s more important to reach your goal than just keeping your credit score in one place.
How do I find a credit counselor?
When it comes to choosing a consultant, we consider several criteria to be critical:
- Place of work.
We have listed accredited non-profit organizations that employ reliable professionals – these places you should visit first.
You should not look for such an expert in social networks or just use the advice of friends, because this person will help manage your money and any of his wrong decisions can ruin your life. This choice should be taken responsibly.
- Education and reviews.
Usually, counseling agencies have profiles of their consultants on their websites where you can look and see if this person is a certified professional.
- First free consultation.
This is a crucial point for two reasons. First, you have to meet or chat online with your consultant to see if he is right for you. Spending money at this point is not a wise financial decision.
Second, according to the Federal Trade Commission, most credit counseling services should be free. But, again, this is to help people in dire financial situations, not to drive them into more debt.
In general, you can start by going to your nearest counselor, such as at your credit union or university, to understand how the process works and how you can prepare for it. Perhaps that’s where you’ll meet a good expert. But, most importantly, keep all of the above points in mind.
Credit counseling vs. debt consolidation
It is imperative to understand that these services are different, although both are related to credit. Credit counseling is professional help in managing your finances, analyzing your current situation, negotiating debt settlement, and deciding how best to achieve your goals.
At the same time, debt consolidation is when you pay off all your other debts or credit cards with a new one, thus lowering your credit rate and expenses. For example, before, you could have several small loans at different rates, but now you will have one larger loan at a lower total rate. This action results in a slight drop in your credit score at first but affects it well in the long run.
What should you choose between these two services?
First, ask a professional for credit counseling to see if you need to resort to debt consolidation. The best thing you can do for your finances and yourself is to say goodbye to all your credit as quickly as possible, which is what the lower rate achieved through debt consolidation will help you do.
The main thing is not to make this decision on your own because you can make a mistake in the calculations or the terms of the new loan and end up with a higher rate instead of a lower one or lose money on numerous fees.
Credit counseling vs. credit repair
Although these services sound pretty similar, there is a considerable difference between them. As we said before, credit score counseling is entirely safe and free to help you manage your finances and make a plan to reach your goal. So what then is credit repair?
Using this service, you pay agencies to remove negative marks from your credit report. For example, suppose you have had a bankruptcy and many financial institutions don’t provide you with new loans. A credit repair agency can help create a plan to challenge the credit bureau’s bankruptcy record in this situation.
It is essential to understand that this is not a very safe service because you will not always get what you are hoping for. For example, if you have had charge-offs or tax liens, there is no guarantee that the agency will be able to remove that negative mark from your credit reports. And such services are costly, with up to $200 initial fee and $20 to $150 monthly fee.
You should know you can permanently remove only factual inaccuracies, such as errors on your credit report. Then, all you have to do is to provide proof of your arguments to the credit bureau. If you’re right, it’ll remove the negative marks for free.
Scammers: what to watch out for when seeking credit counseling
Unfortunately, people in dire financial situations are often the most sensitive and vulnerable to scammers. They no longer know how to deal with their problems on their own, so promises from scammers that things will get better in a brief period are enormously appealing to them.
There are some red flags to help you expose a scammer and not pay money to someone who can’t help you:
- These people often ask to pay for their services upfront without providing a free consultation first. In addition, they often ask to pay in packages to “make it cheaper” and set short deadlines for payment – such as 24 hours, “or there won’t be any places for you later.”
- They promise things that definitely won’t work out. For example, raising your credit score in one month, writing off a huge debt, or lowering your credit rate by 50%.
- You can’t get accurate information from them about themselves, their clients, or their employers. Moreover, these people usually work for themselves or fictitious organizations and cannot explain what tools they will use to help you.
- They often tell you different information to confuse you.
- Scammers may ask you to lie to banks to get better terms, knowing that this will only make your situation worse in most cases.
- They sell you their services and promise you some results without knowing your situation, expenses, and income. Such people only want to make money, not to solve your problems.
Remember that paying off a loan or raising your credit score can’t take one month; it’s a gradual process that requires your responsibility, willpower, and constant involvement. Anything too good to be true is most likely a scam.