Do Credit Counseling Services really help

It is possible to find credit counseling services that are free. I went to one myself. It would be smart to take advantage of this service if you can find no way to get out of debt on your own. A credit counseling service will look at your debts and your income. They will look at your monthly living expenses. From these, they will determine what you will be able to pay monthly on your debts. They will also likely try to get you on a budget so you will have more money to pay down debt.

As part of the service, they will contact your creditors and try to lower your total debt. Most creditors will do this for you because they would rather get less money from you than none at all. They will also agree to a reasonable payback plan. As part of the overall program, you will undoubtedly be asked to cut up your credit cards and not use them, or, not using them may be part of the deal for lowering your debt.

All of this is great if it works. The downside is that you won’t have good credit for a while and your credit report will show your credit problems. If you manage to pay off your debt, however, it is possible to begin repairing your credit. This can be done in a relatively short time. It means simply paying your bills in a timely manner and establishing credit again. You can re-establish credit with a cash credit card where you advance the cardholder a certain amount of money, $300 or more, and then “charge” items against that amount.

Over time, your credit can be re-established, and if you behave responsibly, you can continue debt-free and with your good credit restored. All of the steps above can be done on your own. The value of the counseling service comes in if you don’t feel confident enough to do it yourself.

The other option is just to take an honest look at your income and expenses and see if you can severely cut back on your expenses. This can be done in the area of entertainment and eating out. It can also be done in the area of unnecessary expenditures, like a new iPhone or a bigger TV. You will be surprised at how quickly you can pay off your debts by simply cutting back on expenses.

In my case, I didn’t want to follow the route of handing my finances over to a credit counseling service because I had just gotten a good job. I figured I didn’t want to lose my credit cards or my good credit. I simply lived rather frugally and paid off my $36,000 credit card debt in a relatively short time. In one year, I paid off about $16,800.

Once I paid off my debt, I didn’t change my lifestyle appreciably and began saving over $1,000/month for my retirement and/or a home. Being $36,000 in debt did not hurt my credit standing and paying it all off left me with a very good credit report.