When struggling with overdue debts and bad credit, you might be considering credit repair counseling as a way to mend your situation.  But before you take a leap in this direction, read below to learn exactly what credit repair counseling is all about and how it works.

Credit repair counseling is a two-fold process involving negotiations and education.  A credit counselor may offer counseling to a consumer about debt and how to avoid bad credit.  Counselors may also help consumers that already have bad credit to get back on track with their finances.

As for negotiations, credit repair counseling involves contacting each creditor owed to negotiate a better payment plan for the consumer.  Basically, the counselor is acting as a go-between for those consumers who are unable to negotiate better terms on their own.  The credit counselor might be objective in the sense that he is not emotionally involved in your situation; however, be aware that he does earn a fee or percentage of moneys collected from you - usually paid by the actual creditors.  There may also be fees due on your end depending on which company you choose.

Negotiations may involve getting a lower payment agreement, lowering the overall amount due, or lowering your interest rates. Credit card issuers will often lower interest rates or eliminate them during a credit negotiation, which can possibly take years off your credit card debt repayment!

Payments through Credit Repair Counseling

Typically the credit counseling service will allow you to make one payment and then the service will disperse your money to the individual creditors.  This can be a big help because your one monthly payment will likely be less than all the individual payments were combined before using the credit service.

Current Accounts - Better for Credit Rating

When your accounts are all delinquent, this reflects negatively on your credit report and lowers your credit score.  Using a credit counselor may help you bring all past-due accounts to a current status.  This process is called curing or reaging the account.  You can only achieve this status by making all your payments on time for several months as an act of good faith.  Then all your remaining payments will be paid on an up-to-date account.  Though this process doesn't erase any past delinquencies on your credit report, it does create a more positive outcome once the credit bureaus start reflecting the "current" status of your accounts.  Then you can begin to build back your credit, and in time, those delinquent marks will begin to disappear.

As you seek financial help through credit counseling, keep in mind that the FTC (Federal Trade Commission) strongly urges citizens to be cautious in their selection of a service.  This is due to the thousands of complaints received about credit counselors, many of which have to do with hidden fees and/or voluntary contributions.  So do your homework and be sure to read all the fine print before signing an agreement.  Shop around and interview with several counselors to see what each has to offer.  Check with your local Better Business Bureau to make sure there's not an unusual amount of complaints against the company.  There are reputable debt counselors available, but knowing where and how to look for one is important to avoid scams or unreasonable fees.

In a nutshell, credit repair counseling can help you if you're at your rope's end with over-due debts and poor credit.  Sometimes getting outside help can give you a new perspective on your situation.  You'll be able to think more clearly and keep a positive attitude that there is light at the end of the tunnel!