Consumer Credit Hotlines Underused - Other News

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Consumer Credit Hotlines Underused

Consumer Credit Hotlines Underused
The content is accurate at the time of publication and is subject to change.

As part of the Credit CARD Act of 2009, the phone numbers for non-profit credit counselors haves been printed on the back of every credit card statement since , which started in February of last year2010. However, according to the National Foundation for Credit Card Counseling, consumers are not taking advantage of the opportunity for help. Only 150,000 calls have been received since February, when the phone number first began appearing on the credit card statements. No one is quite sure whether it’s lack of interest, lack of knowledge or confusion on what a credit counselor does that’s keeping consumers from reaching out for help.

What Credit Counselors Do

Some experts believe the lack of interest in working with a credit counselor is a result of that consumers are confusion about the difference between credit counseling services and debt settlement services. Non-profit credit counselors are just that-professionals that help by counseling you on how to get out of credit trouble. They charge either , but without charging no fee or a low fee you a fee to do so. Credit counselors can help consumers with anything from creating a household budget to steps the consumer can take to prevent foreclosure. Most importantly, they can act as an intermediary with credit card issuers to lower interest rates associated with the consumer’s accounts and help waive fees. Credit card companies pay them a fee based on their ability to help the consumer make their monthly payments.

Debt settlement companies are for for-profit businesses that, so they charge for their services. These companies also work to negotiate payment arrangements, balance reduction or waiver of the debt altogether with the creditors of a consumer. This industry, however, has gotten a black eye by a few bad apples aggressively telemarketing their services and charging consumers hefty up-front fees before any work is done.

Effects of Working with a Counselor

When consumers work with a credit counselor, this does not typically show up on a credit report or affect the consumer’s credit score. When consumers work with a debt settlement company, however, it does show up on credit reports and does affect the credit score of the consumer.

Generally, when a future creditor pulls a credit report that shows a consumer is or has worked with a debt settlement company, it sends the message that the consumer cannot manage his or her own finances. Typically, it prevents or makes it difficult for the consumer to establish new credit.

When it comes to the credit score, however, working with a debt settlement company can actually be beneficial to increase the credit score. The increase of the credit score has to do with how the credit score is calculated. When a debt settlement company succeeds in reducing or closing out credit balances and closing out credit account balances, this can increase the score because some of these old it appears as if old debts get wiped out.

It’s important that consumers understand the difference between the two types of services. If the non-profit credit counselors want to increase the number of calls they receive from volume of their phone calls of consumers looking for requesting help, it may take more marketing and promotion efforts on their part to bring awareness to consumers. Since including the information on credit card statements has not been effective, then it’s time to employ a different approach. To begin to understand what a credit counselor can provide, check out the websites for national organizations representing credit counseling firms: www.aiccca.org and www.nfcc.org.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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