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.