There are many different meanings for the term consumer credit counseling.

In it’s simplest form, credit counselling is the process where you meet with a credit counselor and they give you advice on managing your money. They will help you deal with credit card debt, and they will explain how to improve your credit score on your credit report.

In addition, if you are planning to file for personal bankruptcy in the United States, they will conduct the mandatory credit counseling before filing bankruptcy, and the post bankruptcy filing credit counseling session. In Canada, the credit counsellor will conduct the credit counselling during the bankruptcy process.

Finally, a credit counselor will actually negotiate with your creditors on your behalf through a Debt Management Program where you make one payment each month to deal with your debts.

For more information, consult a local credit counselor.

A great way to make sure you don’t miss any payments is to set up your bills to be paid automatically through your bank. Most utilities, cable companies, and phone companies offer this payment option, and it’s a great way to make sure you don’t miss any payments.

Making all of your payments on time is very important, because late payments can have a negative effect on your credit score.

If you don’t want an automatic payment, it is also possible to pay your bills on-line, on the date due. For example, if your hydro bill is due on the 20th of this month, set up your on-line banking to pay the bill on the 20th of this month. Your payment is made on time, but the money stays in your account until the exact due date, so you may earn some extra interest.

Be careful with this, however, because if you’re not monitoring your account regularly, you could find yourself becoming overdrawn and hit with multiple overdraft fees from your bank.

Reader’s of this credit counseling blog know about consumer credit counseling as a way to deal with your debts, and most people now understand that you must have mandatory credit counseling before filing bankruptcy.

Many people may not realize, however, that since September 1, 2006 residents of certain areas of Chicago, Illinois are required to have credit counseling before they are allowed to purchase a house. The law, called the Illinois Predatory Lending Database, is intended to curb predatory lending by educating borrowers before they enter into a mortgage agreement.

Before buying a home, credit counseling must be obtained from federal Department of Housing and Urban Development-certified counselors for people looking to buy homes in 10 Chicago ZIP codes who have low credit scores or whose income meets other criteria. The law only applies in certain zip codes that the state says have a high proportion of “predatory loans” and higher than average foreclosure rates.

Since most would agree that credit education is sorely lacking in North America, it could be argued that everyone should be forced to attend credit counseling sessions. However, a lawsuit is now underway, arguing that this law unfairly targets minorities. You can read more about it in today’s edition of the Chicago Tribune.

In a press release issued today, the the National Foundation for Credit Counseling (NFCC) commented on the first year of mandatory credit counseling before filing bankruptcy as a result of Bankruptcy Reform legislation passed in 2005 that requires all debtors to receive credit counseling before they file for bankruptcy.

Some of their key findings:

– Through the first 11 months of the new law, NFCC members delivered 563,494 bankruptcy counseling and education sessions and issued 630,422 certificates.

– Consumers filing for bankruptcy were “upside-down” financially, with average unsecured debt being $11,599 greater than average annual income and the unsecured debt to income ratio has deteriorated since the April NFCC report.

– Mortgage delinquency was more prevalent for consumers filing for bankruptcy than for those receiving non-bankruptcy counseling.

– Phone and Internet counseling continue to be the predominant choice for services.

The full press release can be read here. Clearly the cost of providing the mandatory credit counseling is more expensive than originally anticipated, so further changes to the rules are possible. Stay tuned to this credit counseling Blog for updates as they become available.

Your credit score is a mathematical calculation, done by the credit bureau, that determines whether or not you can borrow money, and what interest rate they will charge you for the money you borrow.  The better your credit score, the lower the interest rate on your loan, so a good credit score is very important.  Here are some tips for improving your credit score.
First, pay all of your bills on time.  If you are late paying even small bills, like your monthly hydro bill, you will have a lower credit score.
 Second, do not apply for a large number of loans in a short period of time.  If you need a loan or mortgage, apply for it, but do not apply for a lot of them in a short period of time, because that will lower your credit score.
Third, try to keep your life as stable as possible.  If you constantly change jobs, and constantly move, the credit bureaus will question your economic stability, and that will lower your credit score.
If you are worried that you already have a low credit score, make an appointment with a credit counselor to review ways to improve your credit score.

There are two obvious reasons why credit card debt is so dangerous.
First, credits cards are easy to get, so most people have more credit cards than they need.  The more credit cards you have, the more you spend, and obviously that is very dangerous.
The second obvious problem with credit cards is that they typically charge a very high interest rate, often two or three times as much as a regular bank loan.  If you don’t pay off your balance in full each month, you will pay a high rate of interest, which means it will take you a long time to eliminate your credit card debt.
If you carry a balance each month on more than one credit card, make an appointment for credit counseling so that you can deal with your credit card debt.

When you meet with a credit counselor they will start the consumer credit counseling process by explaining your options for dealing with your debt.  One of the options to consider is debt consolidation.  Here’s what you need to know.

First, the good: a debt consolidation loan is used to combine the payments for many debts into one payment, so you only have one payment to remember each month.  As an added benefit, the interest rate on a debt consolidation loan should be lower than the interest rate you are paying on your credit card debt and other high interest debt you are consolidating.

The bad: you may not be able to afford even the new, lower payments on your debt consolidation loan.  Do a budget first, and don’t agree to anything you can’t afford.

The ugly: there are many debt consolidators that will charge you a fee for doing what you could do yourself, so don’t sign anything until you read it.

Debt consolidation is a great option for many people, but only if you consider your options carefully, and think before you sign anything.

Welcome to the Credit Counseling Blog, where we will discuss credit counseling, debt manage plans, and ways to deal with your debt, all from a consumer’s viewpoint.  Stay tuned for more!