Sense & Centsibility Blog

6 Myths About Credit Counseling

Person with phoneIn the same way I try to avoid using clichés, many people avoid credit counseling like it's the plague. They’ve heard from their friend whose sister’s uncle’s cousin got counseling and it trashed that person’s credit or they ended up in a worse position than before. I’m here to set the record straight.

If you get credit counseling from a reputable organization, and you're willing to take ACTION, more often than not, your situation will actually improve.

And if your situation doesn’t improve immediately, you’ll at least get the tools you need to get you back on the road to financial stability.

Myth One: “I’m not sure who to talk to.”

LSS Financial Counseling is a member of the National Foundation of Credit Counseling, which is the largest group of reputable non-profits in the US that provides credit counseling. You can always check with the Better Business Bureau and your state’s Attorney General. In fact, the MN Attorney General actually recommends LSS for credit counseling.

Myth Two: “I can’t afford credit counseling because there’s a fee.”

You should never, I repeat, NEVER have to pay just to meet with a financial counselor to discuss your finances.

Myth Three: “It will negatively affect my credit.”

Simply meeting with a financial counselor DOES NOT AFFECT your credit at all. Credit counseling agencies don’t report anything to the credit reporting bureaus.

Myth Four: “Debt settlement is a much better and cheaper option than a Debt Management Plan.”

The opposite can actually be true. There are companies out there that make debt settlement sound almost magical – “we’ll negotiate with your creditors so that you pay thousands of dollars less.” What really happens is you pay these companies directly and they hold on to your money until they have enough to settle a debt. In the meantime, your credit is getting ruined because your creditors aren’t getting any payments...the debts go to collection and then you run the risk of judgments and wage garnishments. Scary, right? Not to mention they typically charge high fees. So talk to a reputable financial counselor about debt settlement first because you should never pay anyone to settle your debt.

Myth Five: “A Debt Management Plan is basically the same thing as Debt Settlement.”

Actually, a Debt Management Plan (DMP) is consolidating your debt and paying it off in full. You make one monthly payment to an organization like LSS Financial Counseling and we disburse the payments directly to your creditors monthly. There are fees involved if you start a DMP with any organization, but they are minimal compared to debt settlement company fees…not to mention people on DMPs usually end up paying thousands of dollars less in the long run due to reduced interest rates and/or the fact that the debts are paid in 5 years or less. Also, if you’re behind on payments, some creditors will even “re-age” your account which will allow it to become current just by starting the DMP.

Myth Six: “They’re just going to give me advice.”

When meeting with a credit counselor at LSS, s/he will help you create a budget/spending plan. The counselor will provide realistic solutions to conquering your debt. And when you leave the session, you’ll take with you an action plan including tangible steps to take and tools to improve your financial situation.

Would you take 45 minutes out of your busy schedule if you knew your financial situation and stress level would improve? Oftentimes people find that even just getting everything down on paper will help, because as corny as it is, knowledge is power. If you know what you’re dealing with, you’re more capable of taking action…and that’s crucial when it comes to finances.

LSS Financial Counseling will empower you to conquer your debt. You can call 888.577.2227 to schedule an appointment over the phone or in person. Or, if you want to get started right now, just click here to begin your online budgeting counseling session.

Author Elaina Johannessen is a Financial Counseling Supervisor with LSS Financial Counseling.