Definition: What is Credit Counseling?
Credit counseling is a service designed to help people manage their debts.
When someone gets too far into debt, or starts getting behind on their payments, it can affect every aspect of their lives.
It can make getting credit, finding an apartment, or even getting a job difficult.
Credit counseling provides people in these types of situations with the tools and education that they need to start repairing their credit and improving their financial well-being.
Additional Overview of Credit Counseling
One of the primary tools of credit counseling is helping consumers to negotiate with lenders and coming up with debt management plans.
This involves a new agreement that states how and when a debt will be repaid.
Credit counseling agencies can sometimes help clients pay fewer fees or less interest when working out these plans with creditors.
Debt consolidation is another part of this process.
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If a person receiving credit counseling has a number of debts from disparate sources, part of the debt management plan usually involves consolidating all of his or her debts into a single payment.
This makes it easier for people to budget, and increases the odds that the individual will be able to successfully pay off their debts.
Participating in a debt management plan offered by a credit counseling company does not directly hurt your credit score. However, it does appear on a credit report, which could give cause for concern to future potential lenders.
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