Credit Counseling

Credit Counseling is a tool which gives idea to Debtor to improve his Credit History or helping out debtor to avoid incurred debts. In other way it’s help to educate the debtor. In the same way we can call it as a Debt Counseling Agency.

These type Debt Counseling Agency deal with Creditor to build up a Data Management Plan. Data Management Plan is a criterion to improve the debtor reputation in terms of financially Output. That can be in terms of Repayment, Reduce the fee, Interest rate or Percentage. This plan works like an intermediate between Debtor and Creditor and build healthy relationship.

Benefits for Data Management Program :

1. DMP helps debtor to consolidate the total payment in one Installment and then pay it to creditor. Mostly people who are having credit card when they are going to pay the bill the bank prefer the lowest Amount. Generally some DMP advertise to reduce the payment up to 50% but infect it would not be above 10-15%.


2. Second benefit of DMP is reduction in interest rate. With default credit card a person would be pay interest rate 40-50% that should be 10-15%. Like a debtor who is going to clear his debts with in 10-15 Years with interest rate 30-40%, through DMP he could be repay it with minimum interest rate. It also feasible to make it with lower interest rate.


3. Third benefit of DMP it improve the Financial goodwill of a person e.g. if one of customer is not paying his debt on his due date and he delayed it for 2Month so the creditor could consider his payment 60days past due. Through DMP you can pay your money to creditor on time or if delayed that DMP will negotiate for you and your monthly payment would be on due month.

So these are all the benefits which DMP gives to customer. That can represent a customer negative report in Positive manner. At the time of checking through credit Bureau your credit score would be helpful for you.

Background of Credit Counseling :

The first credit counseling agency created in 1951 in USA. According to W. Patrick Boisclair, Chairman of the NFCC's Board of Trustees, "The NFCC initially monitored legislative and regulatory activity for its retail credit members" and "also conducted public awareness campaigns on credit." The agency found as an education tool to educate the lender and give them their credit valuable output. But they did not find for collection the debts and repay the amount for debtors. Their main objective was to promote financial awareness and avoid debtor to bankruptcy. The first local agency emerged in 1960 to serve debtors and educate customer directly.

There is some credit counseling agency which belongs to any trade organization e.g. AICCCA or AADMO. But it’s not mandatory that every agency does not belong to trade organization nor are they required to do so. In United States there are 1000 active credit agencies. Credit counseling is a profit making industry in Europe for Debts Management as well as charities.

Who all have access to your credit report?

When you apply for a new credit – whether for a credit card, an auto loan, or a home mortgage – lenders want to know the likelihood of you paying back to them. To help them in assessing your credit worthiness, credit scores are used. Apart from your lenders, there are plenty of others who view your credit files and scores to get an idea about how you manage your finances.

1. Insurers - The majority of auto insurance companies use your credit score to decide whether to issue you a new policy or not. They also look at your score to decide whether to renew your existing policy or not. Your credit score also helps them in fixing the price that they will charge you for your insurance.


2. Landlords - Landlords view your credit report to give a check to your payment history, and if it comes out that you have been delinquent or have been late in paying your bills then in all possibilities your rental application will be turned out. In case a landlord accepts your application for rent, you may have to find a friend or a relative to co-sign your lease or you might have to pay a higher rent or a lump sum amount as security deposit.


3. Employers - Employers can pull your credit report to evaluate your eligibility for "employment, promotion, reassignment or retention." Employers view bad credit as a signal of financial irresponsibility, some might even think that you'll spend more time in bothering about your financial worries rather than concentrating on the job.


4. Cell phone service providers and utility providers - Utility providers (like gas and electricity services) may pull your report to check whether you pay your bills on time or not. If you have a good score then you might even qualify for favorable rates. Even cell phone service providers use your report prior to signing you up for a plan.

How to remove the errors from your credit report

What you will do in case you get your credit report and there are some negative marks printed on it that you were not involved in or were not part of? This error situation happens in many people’s credit report and can happen with your credit report as well. So what will you do if you find some errors in your credit report?

No doubt, it will not be easy to remove these errors from your credit report. But always there are some ways you can follow to solve a difficult problem even. So here some steps to follow to get the information corrected in your credit report:

When you get some error in your credit report, the first step you have to follow is contacting the credit reporting agency that issued this report in written. In your letter to the credit reporting company, you should attach the relevant documents that show that the information is incorrect. With this you should include information like your name, address, explanation of error situation at hand and why you are reporting the errors in your credit report copy. You should also mention the entries that need to be deleted or edited from your credit report.

Now send this letter to the respective credit reporting company via certified mail and keep a copy of your letter at you in case there are some disputes at their end. When your credit reporting company gets the dispute letter from you, they will start their investigation if they think the dispute can be true or there is some seriousness in it. Normally they start investigation within 30 days of receiving the dispute letter. In their investigation, report providing company will send all the documents and disputes to the company in question in order for the company to do their own investigation and find out why they have placed a particular entry in to that credit report. When that company or organization completes their investigation, they will send their statements about the disputes if they were true or not and support their statements with the evidence of their own.

In case there was some error in credit report, that company will inform all of the credit reporting agencies about this error and get it corrected. Once all this process is completed, your reporting company will send you a new copy of free credit report with all of errors removed from the report.

How Closing Credit Cards Affect Your Credit Score

When it comes about managing many credit cards, you have to make decision about closing any or some of your credit cards. But before thinking of closing any of your credit card account, try to understand what will happen to your credit score.
If you are thinking that closing of some of credit cards will raise your credit score, then officially it is wrong. Officially closing some of your credit card accounts will lower your credit score as that might reduce your credit history length which counts the 15 percent of your credit score and will also lower the amount of credit available to you, which will increase your debt to credit ratio.

So closing of credit score will not:

• Raise your credit score


• Erase credit card history from your credit report


• Keep the history from being included in your credit score calculation

So in case you are closing your credit cards account, don’t do it as that will not help you in raising your credit score. But closing some of your credit cards will lower your credit score. Your credit score will drop if you decide to close a credit card:

• That still has some balance to be paid


• Has some credit available when other credit cards don’t have


• Was the first credit card that you opened


• No other credit card or loans

So for the sake of your credit score, it is important for you to calculate your decision before closing any of your credit card account.

Negative information life on a customer credit report

When you have true negative information on your credit report, it will be removed by passage of time that can be 7 years, 10 years, 15 years or forever. According to FCRA (Fair Credit Reporting Act), Negative information stays on a consumer credit report for seven years but there are some exceptions to this rule for some type of negative information’s.

1. Bankruptcy information may be reported for 10 years from the date of file


2. Criminal convictions related information may be reported without any time limit


3. Delinquency information regarding collections and late payment stays on a consumer credit report for 7 years from the date of delinquency.


4. Charge off remains for 7 years and 180 days from the date of reporting


5. Student loan defaults remain for 7 years


6. Foreclosures remain for seven years from the date foreclosed


7. Lawsuit or judgment stays for seven years from the date of filing


8. Paid lax liens information stays for 7 years from the paid date


9. Unpaid tax liens stay for 15 years


10. Line of credit or loan information stays for 10 years from the date paid in full or close


11. Closed amounts related information stays for 10 years if paid as agreed


12. Credit related inquiries stays for 2 years placed by you and the creditors


13. There is no time limit if credit information is reported in response to an application for job with salary greater than $75,000


14. Credit information reported in case of a application for a credit or insurance of worth $150,000 has no time limit

You have a regular or instant credit report

So what is the difference between instant credit report and regular credit report? When I try to find out the answer for this question, I found certain websites offering instant credit report. When I check more, I found that most of credit reports are instant. The main difference between instant and regular credit report is time and how you are planning to receive your credit report.

Our credit history is monitored by three credit reporting agencies Equifax, Experian and TransUnion. By law, we are provided with a free copy of credit report from all of three major bureaus on request. Your credit report will be instant or regular depends upon how you order it and how you choose to receive it.

1. In case you chose to get your credit report online and then have mail to you, then your credit report is instant or quick. The information about your credit history is available to all of major credit agencies. So whether you chose to go for one or 3 in 1 credit report, that information is instantly available and can be easily tracked by your social security number, name and address. Once this info is provided to these agencies, their database can do it quickly or instantly. So this way you will have instant credit report.


2. Second way of getting your credit report is mailing to FTC (Federal Trade commission). This way you mail to the Government and get your free credit report. In this case the information about your credit report will be processed and then mailed to you. This is a slow process and can take few to many weeks for completion. So this way you will get your annual free credit report and will not be considered as instant credit report. But getting your credit report via mail will make you feel safe as getting it using internet.


3. Third way of getting credit report is making a call to Federal trade commission or any of credit agencies you are willing to get report from. Every year you are entitled with a free copy of credit report. And how you go about it, it is up to you. Getting credit report by calling is faster than mailing. But it will still take some time and you will need to submit your personal information like your name, address and social security number. Once you have made the call for a copy of your credit report, they will mail you the copy of your credit report. So this will not be instant credit report as it will take some days for the report to approach to you.