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Credit Counseling

Struggling to keep up with your payments? When your financial situation calls for it, seeking the services of a good credit counseling agency can help you get back on track.

Credit counseling is a service offered to people with excessive debts as an alternative to bankruptcy. A credit counselor will work one-on-one with you to provide financial education, credit analysis and a working budget. For most who speak with a counselor and are serious about working their way out of debt, counseling has proven to be a successful alternative.

A counselor will work with you to provide the best possible options based on your individual financial situation. They can provide assistance with all your financial obligations, not just the relationship you have with us here at Bank of America. One of these options may be a Debt Management Plan (DMP). A DMP is designed to work with all your creditors providing a multitude of benefits such as reduced payments and interest rates and the elimination of late fees (if applicable). As part of the DMP, you will then pay one monthly payment to your counseling agency who, in turn, will disburse your payment among your creditors.

Credit counseling is not for everyone. It primarily benefits people who (1) can’t afford to make more than minimum payments each month, (2) are near or over their credit limit or (3) constantly receiving collection calls. The bottomline—if your debts just don’t seem to be decreasing on a month to month basis, you may want to call a counseling agency.

Be careful when choosing a credit counseling agency. There are a lot of agencies that may be more interested in selling you their services, rather than helping you trim down your debt. Consider the following tips:

 

  • Be sure to select a non-profit agency under section 501c(3) of the Internal Revenue Code.
  • Be careful what you buy. Some agencies are only interested in selling a DMP—even if you don’t need one. Counseling should always be objective, include a credit report review and budget analysis and offer assistance to get you back on track.
  • Be sure that the right questions are being asked. A counselor should be seeking in-depth information about your finances. If not, they will be in no position to select the best option for your particular financial situation.
  • Beware of "debt settlement" agencies. They often masquerade as credit counseling agencies to gain legitimacy with the public. These agencies often (1) offer little or no financial education, (2) charge excessive fees and (3) allow their client's debt to become delinquent or charged off before a settlement is reached. The result? You can seriously damage your credit, face future legal proceedings and possibly owe taxes on any negotiated settlements.
We have put together a list of external websites that may be a good starting point. These non-affiliated sites offer a wide range of counseling, assistance and recommendations for managing credit and reducing debt.
Non-Profit Credit Counseling & AdvocacyDescription
Association of Independent Consumer Credit Counseling AgenciesA member-supported national association representing non-profit credit counseling companies that provide consumer credit counseling, debt management, and financial education services
National Foundation for Credit CounselingPromotes the national agenda for financially responsible behavior and builds capacity for its members to deliver the highest quality financial education and counseling services
Government Financial & Debt EducationDescription
Federal Trade CommissionA U.S. government institution that protects America's consumers by providing help for choosing a credit counselor
Financial Literacy and Education CommitteeThe U.S. government’s website dedicated to teaching all Americans the basics about financial education
National Financial Education Network Database for State and Local GovernmentsA national database that brings together representatives from different areas and levels of government across the nation to advance financial education efforts

Be prepared to answer some very tough and personal financial questions. You will need to discuss your monthly income and expenses, so it would be helpful to have any statements and bills available. You should also be prepared to estimate your discretionary spending throughout the year—like for meals, clothing, donations, gifts, etc.—as these will need to be considered in your budgeting efforts.

 

Be open and honest about your financial situation. Remember, your counselor will require a complete understanding of your finances to help you establish an effective budget.