With the current state of the economy, many people are looking into the pros and cons of consumer credit counseling. For many, it can be a savior, allowing people to save many of their assets, including their homes. Still, many still consider consumer credit counseling to be a hard pill to swallow. This is quite understandable, as it is really something that's quite misunderstood. For many people, consumer credit counseling is a great alternative to bankruptcy. If you've fallen on financial problems, you should really take a look at some of the advantages and disadvantages.


Consumer credit counseling services will help you create a debt management plan based on your individual needs and the needs of your creditors. As you can likely guess, a tailor made plan will generally be more successful, giving you a chance to climb out of the debt hole you're in. It's one of the alternatives to bankruptcy to consider.

Consumer credit counseling will work with your creditors, so you won't continue to receive collection calls. For many, the collection agency phone calls become almost unbearable. Many cringe every single time the phone rings. This is truly a benefit, and it will likely help to reduce stress.

Consumer credit counseling services will work with your creditors to help reduce the amount of interest and late fees you owe. This is one of the most important benefits of these services. Many people find that the outrageous interest rates and late fees they pay make it impossible to get themselves out of debt. By using consumer credit counseling services, you will begin to reduce your total debt quickly.

Your credit score will improve over time with consumer credit counseling. While the immediate impact on your score is negative in many cases, the long term benefits are quite apparent. As you debt is paid down your accounts are made current. When your accounts are re-rated, your credit score will improve.

Everyone gets their money when you use consumer credit counseling. You are still paying back all of those that you owe money. For many, this is important. It will give you a chance to hold your head high knowing you didn't file bankruptcy and paid off your debts.

There are several nonprofit credit counseling services out there. This means they will work for you without charging outrageous fees. This is quite appealing to some and it will really help to reduce the fees associated with these types of services.

Generally speaking, you will only make one monthly payment when you use consumer credit counseling. This makes debt management a little easier for many people. Essentially, you pay the service company and they pay the people you owe. For many, it's a major stress reliever.


The initial impact on your FICO score is pretty severe when you use consumer credit counseling and the services they offer. Your score will go down quite a bit initially, increasing the amount of repair you need to do. For some it may not matter, depending on their score. For others, it will have severe consequences.

You may not be able to use your credit card, even in the case of an emergency if you use consumer credit counseling. In many cases, your card accounts are frozen. This means you will not be able to make any charges to them. Should you have a financial emergency, like car repair needs, you will not be able to use your card. This, coupled with the initial negative impact on your FICO score, could make rounding up the money impossible.

If you have long or short term plans to make a large purchase, like a home, you will have a much more difficult time when you are using or have used consumer credit counseling services. This really ties into the impact on your FICO score and it really should be taken into account. If a home is in your plans for the future, it will likely be delayed for some time. Lenders will see this as a sign of financial trouble, which is quite understandable.

Even nonprofit consumer credit counseling services will charge a fee. Nothing is free. A nonprofit company still needs to pay employees, file paperwork, and get all the legal requirements taken care of to stay in business. There are fees involved no matter what consumer credit counseling service you decide to use. Nothing is ever free.

There are some very ruthless companies out there that you need to watch out for. Some consumer credit counseling services have been known to be scams. You must pay close attention to this, or you may end up paying someone that doesn't pay off the money you owe. In some cases, the contract you sign will specifically state that if you are late on just one payment you forfeit all the money you've paid so far to the company.

What does this mean?

Really, consumer credit counseling is a legitimate alternative to bankruptcy. You will know that you've paid off your debts, so you can hold your head high. It's really up to the individual to determine is this type of service is right for them. There is no bright line rule out there. Use caution, avoid scams, and consider all possibilities when you try to pay down your debt with any method, including the use of consumer credit counseling.

While loans will become harder to get when you're using consumer credit counseling, it's important to keep in mind that many that use the service already have a poor FICO score. For this reason, the negative impact on scores and increased difficulty in obtaining a loan just doesn't matter too much.

Consumer credit counseling is essentially a loan. You pay them, they pay the people you owe the money to. It should be looked at in this manner. Like anything else, there is risk.

Consumer credit counseling services are like anything else; there's some good and there's some bad. It's up to you to determine if it's right for you. Don't take it lightly, it will have a big impact on your life. Consider all options carefully when you wonder, should I file bankruptcy or not?