Future Finance

Counseling Carries No Penalty

For many borrowers, credit counseling is simply a matter of getting good advice. They acquire skills they may never have learned such as how to set up a budget. Many young adults find themselves on their own with few money management skills. Our parents took care of things and we never had to balance a checkbook or calculate the cost of borrowing. A few early mistakes can lead to serious problems later in life.

These borrowers can turn their finances around on their own without negotiating with their creditors or changing their debts. In these cases, credit counseling carries no penalty. Counseling is done in confidence and lenders will never find out their customers have sought help. For this reason consumers should never be afraid to seek counseling.

Debt Changes Have Some Effect on Credit

The next step in credit counseling is negotiation. The counselor may advise the borrower how to discuss debt changes with the lender or, in most cases, will act as an intermediary to help the borrower negotiate a fair settlement. How much the affects a person’s credit depends on how severe the changes are made and how the lender reports it.

Many lenders view credit counseling as a positive step. They are willing to make small changes to a person’s debt without filing a negative report with credit agencies. New government programs exist to help borrowers without penalizing lenders and these can have little or no effect on a person’s credit rating.

Other changes may have more serious effects. Significant changes to a debt may hurt a person’s credit score and personal bankruptcy is a serious black mark on a credit history. However even these changes will have a net positive effect as the consumer gets finances under control and becomes a better borrower in the future.

The Worst Choice is Ignoring the Situation

Debt problems won’t go away. Consumers who keep letting things slide from month to month are just making things worse. Lenders will not give up. Collection agencies can garnish wages or seize personal assets if the debts become bad enough. A repossessed vehicle could prevent a person from getting to work, leading to job loss and more severe debt problems.

Credit counseling is always a positive move. Even if it leads to debt changes that have a small negative effect on a person’s credit score, these negatives are far less than the mounting problems of disregarded debt.

It may feel like you have no choice, but there are many options for struggling consumers. Talk to a credit counselor and find solutions for your debt problems.

Author is a freelance writer. For more information on [http://www.NewSuccessPath.com]credit counseling please visit [http://www.NewSuccessPath.com/]http://www.NewSuccessPath.com/

This entry was posted on Friday, March 12th, 2010 at 12:28 pm and is filed under Canada Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.