Fix Your Credit Problems: Interview with the National Foundation for Credit Counseling

There’s a lot of bad advice floating around out there, and for some time now I’ve wanted to share some truths about finding help with fixing your credit problems. Since I’m no expert though, I turned to Personal Finance Columnist and friend, Liz Pulliam Weston, to help track down a pro.

Liz introduced me to Gail Cunningham, Vice President of Public Relations at the National Foundation for Credit Counseling. Gail was kind enough to share some solid advice on finding help with your credit problems and her take on the current state of the credit world. Check it out:

1. Where can someone go to find trusted, free assistance with fixing their consumer debt problems (i.e. can’t make the payments, in collections, don’t know what is owed, etc.)?

Consumers should reach out to a legitimate credit counseling agency for help. I’ve attached the NFCC Fact Sheet so that you can know a bit more about us, as well as a document I created on How To Select a Legitimate Credit Counseling Agency.

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Unfortunately, there are some bad actors in our industry who are more interested in their bottom line than the consumers’. It is incumbent upon the consumer to do their homework before engaging in business with an agency.

2. How will a legitimate credit counselor be able to help someone with consumer debt problems? What will they actually do?

The trained and certified counselor would do a thorough intake of all income sources as well as debt obligations, probing to find out the cause of the financial distress as well as the consumer’s short and long-term financial goals. After reviewing living expenses, a new budget would be created if necessary. Next, they would look at the debt load. After the budget has been adjusted, there may be enough money remaining to address debt repayment. If not, the counselor will explore resolution options with the consumer.

If it is the right option, the consumer may elect to go on a Debt Management Plan (DMP). If so, the counselor negotiates with the creditors for a reduced monthly payment and to have interest, late fees and over-limit fees stopped or reduced. The overall objective is that the consumer be able to pay his living expenses in full while still addressing debt reduction.

3. If someone gets rejected on a loan and they’re told it’s because they don’t have a credit history, what should they do? How do they go about establishing credit history fast and improving their credit score?

If someone doesn’t have credit, the best way to establish it is with a gasoline card or a store credit card. Those are considered easier to get, particularly in these tough economic times. And, they shouldn’t try to get too much credit all at once. Doing so puts too many inquiries on their credit report and makes them appear as though they’re desperate for credit. Not good. They will have to build a good credit history by responsibly handing their credit obligations in order to create a good credit score. This may take time, but it’s well worth it.

4. Is bankruptcy ever a good option for someone in serious debt? And what advice would you have for those contemplating doing bankruptcy and wanting to start over?

Bankruptcy is the right answer for some, but I’d make it my last stop, not my first. I’d certainly sit down with a credit counselor before I considered bankruptcy to see if there was any other way out.

5. Lastly, you’ve got your finger on the nation’s credit pulse… What’s it really like out there? Are people really struggling? And do you see things getting worse or better for the individual (in terms of the availability of credit and the ability to repay) over the next 6 months?

We saw close to three million consumers last year. Our requests for housing counseling is through the roof. We have a National Locator Line (NLL) through which consumers can dial toll-free to (800) 388-2227 and be automatically connected with the NFCC Member Agency closest to them. Overall, calls to the NLL were up in 2008 by 35% over 2007 numbers.

However, the demand grew as the economy declined. Some weeks toward the end of the year saw an increase of 170% over the same period of 2007. The demand continues as we speak. The causes are varied and complex. Some people simply built a lifestyle that their incomes could not support. When their access to new credit dried up, and the equity in their home evaporated, they were left to pay the piper and often couldn’t do it.

Others bought more house than they could afford once the payment reset, while others bought a house and they should have remained renters. Job losses are staggering. That’s the one that really worries me. Americans have been great spenders and lousy savers. Thus, when the pink slip arrives and there’s no money to fall back on it can get ugly. Consumers typically turn to living off credit cards and pile new debt on top of old. Once their cards are maxed out (remember, no new credit available and no home equity left), they have to turn to bankruptcy.

Thanks for sharing this advice and insight with us, Gail!

If you’d like more information on credit and debt, or to find someone to help you fix your credit problems, please visit the National Foundation for Credit Counseling website.

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Last Edited: June 9, 2010 @ 12:16 pm
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

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