The Do’s and Dont’s of Credit Counseling and Debt Negotiations

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The Do’s and Dont’s of Credit Counseling and Debt Negotiations

Saturday, January 2nd, 2010 Subscribe To Our Feed

I’ve been in the credit counseling industry for many years and have come across some useful advice by some of my previous clients.

1. Know yourself. Know your limitations and boundaries. Do not enter a credit counseling program that is outside of your budget. Likewise, do not fool yourself by not devoting as much time as you should. The fact is that during these difficult financial times you may not be able to pay as much as you would like. The minimum, then, is okay. But as soon as you have more money to dedicate to the program, make sure to follow-through.

2. Know the options. Do not enter a debt settlement program without being presented all the options. You would never buy a computer at Best Buy without checking out the prices at Circuit City. Similarly, take note of the debt management programs available before committing yourself to anything.

3. Know the implications. Before entering a debt settlement program, know all the associated effects. For example, even though credit counseling does not affect your FICO score, it may affect your ability to get a home. But bankruptcy may do the same thing. The question is what are your priorities: leasing business space v. saving money in the future. Figure out if the debt management firm offers Lender Letters or something similar to help you during the home-buying process. This may or may not be available in debt settlement.

4. Know the benefits. Credit counseling can help you reduce your payment, reduce your interest rate, and roll you back to current status. On the same note, debt settlement can reduce your debt’s principal, dramatically reduce your payments, and cut your debt pay-off time in half. Learn all the advantages and disadvantages of each program before making your decision.

5. Stay committed. Pick the program and stick by it. If it’s debt consolidation, make sure you make your payments every month and on time. If it’s debt settlement, don’t drop out of the program because the long-term benefits will be significant. Stick with the program and you’ll be successful and debt free.

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