Learn About Credit - What Is Credit Counseling?

If you need to learn about credit because you have been overdue with your credit card bills and are unable to pay off the minimum payment each month, you should consider credit counseling. Credit counseling services will allow you to not only consolidate your debt into one low monthly payment, but most credit counseling services will also get the credit card companies to lower their interest rate and eliminate fees.

Credit counseling services are usually non profit organizations that teach people how to handle their credit in a responsible way. You can use credit counseling services as an alternative to filing Chapter 13 bankruptcy. Chapter 13 bankruptcy is when your outstanding debt is consolidated and a trustee is assigned to take over your unsecured debt. Just as bankruptcy protection stops creditors from hounding you for money, so does credit counseling.

If you are going to use credit counseling, the first thing you will need to do is gather up all of your credit information including your credit card statements. Make a list of everything that you owe as well as your monthly payments for each card. You will have to provide the credit counseling service with the phone number and account number for each card as well as the balance that is due. You will also have to sign an authorization for the credit counseling service so that they can have permission to access your information and talk to your creditors on your behalf. You are, in effect, giving them power of attorney over your credit cards.

The credit counseling service will then talk to each of the creditors and explain your situation. They will get them to reduce their monthly fees so that you can pay a lot less each month towards your balances. Instead of paying each of the creditors each month, you will pay one payment to the credit counseling service. This is usually deducted directly from your checking account.

You will not be able to use any of the accounts once the credit counseling service starts working on them for you. They will be frozen until they are paid off. In most cases, they will be cancelled. Credit counseling does hurt your credit, but when you pay off the debt, it does renew your debt and does not look as bad as a bankruptcy does on your credit report.

In addition to getting you to pay one low monthly fee instead of many and lowering your payments, you can also learn about credit with a credit counseling service. They will send you DVDs that will explain how you should use credit cards so that you do not have a problem with credit in the future. You can then repair your credit using credit counseling and look forward to good credit in the future.