How Do Lenders View Credit Counseling Services?

How Do Lenders View Credit Counseling Services?

Typically consumers that have overwhelming debt have two options, either enter into a Consumer Credit Counseling Program or declare Bankruptcy. While the two options may have a lot of similarities, most will opt to enrolling into a Consumer Credit Counseling program for such reasons as it is more cost effective and easier to implement.

Many credit card companies and creditors realize that it would be more beneficial to actually work with debtors and make affordable payment arrangements than to pursue typical collection activities. Instead they work with each of the individual’s creditors to come to some agreement that will result into a reduced single payment plan, a consolidation of their debt, and or a reduction of interest rates and late fees – thus making it possible for the debtor to repay his or her debts over a period of 3 – 5 years. Once enrolled, the debtor will make a single payment to the consumer credit counseling service, and then the counseling service will make all the payments to the creditors.

One of the advantages of credit counseling services is to educate their client about debt management and budgeting.

The main disadvantage of enrolling into consumer credit counseling services is that many creditors will make a notation on the debtor’s credit report indicating that the debt is being managed by consumer credit counseling agency.

Another major issue that a client may experience is, even though they are making their monthly payments to the credit counseling service on time, the credit counseling service doesn’t make the payments to the creditors on time. Now this will reflect on the client’s credit report as late payments.

And to add fuel to the fire, it is not uncommon for the credit counseling service to make the payments on time, while the creditors are not accepting the reduced payment amounts. This, too, would negatively affect the consumer’s credit report.

However, if you are in the market to purchase a home or refinance, it is important to find a mortgage expert that specializes in helping individuals that have been enrolled or that are currently enrolled in consumer credit counseling services. The lender will request from the credit counseling agency a copy of the agreement which will indicating the date the consumer entered into the program, all the creditors involved, and the payment history of the consumer’s payments. From this information, the lender will then determine if the client qualifies for a mortgage loan. FHA LENDER’S understand that if the consumer has been making their payments on time to the consumer credit counseling agency, but the creditors have been getting their payments late, then that’s not the fault of the consumer and shouldn’t penalize them from purchasing a home or refinancing their home.

It is important to note that many lenders view credit counseling services as similar to a Chapter 13 bankruptcy, because both can entail a payment plan and re-negotiation of debt payments. (And, in fact, some people who are using a credit counseling service do end up filing bankruptcy because they still don’t have the income or money management skills to handle the payments.) So, in some cases use of such a service can be a negative.

However, many FHA Lenders recognize that if a person is attempting to handle debt responsibly by enrolling in these types of services, then that person probably takes their financial commitments seriously. In general, in order to get a mortgage the borrower must have a 12-month history of paying on time and a letter from the counseling service stating that purchasing a home or refinancing will not interfere with the repayment plan. Thanks to FHA Loans, consumer credit counseling services will not restrict the borrower from obtaining a low interest rate mortgage loan.

Related Credit Counseling Articles

Personal finance: a teenager's view

Personal finance: a teenager's view
The government was making plans to introduce personal finance as a core subject to give students the know-how on managing their money and knowing where it goes and buying the things you need in the future. I think it would be a good thing to teach …
Read more on FT Adviser

International Personal Finance Plc Stock Rating Reaffirmed by Citigroup Inc. (IPF)
International Personal Finance Plc logo International Personal Finance Plc (LON:IPF)'s stock had its “buy” rating reaffirmed by research analysts at Citigroup Inc. in a report released on Tuesday. They currently have a GBX 700 ($ 11.78) price target on …
Read more on Watch List News (press release)

Personal finance: How to get investment advice
Is your adviser tied to only a small selection of providers or product types? Only a fully independent adviser can search the entire market to find the right solution for you. Financial advisers are legally required to provide you with information …
Read more on Scotsman

Which is the best website to view all of my threee Credit reports and scores?

Question by : Which is the best website to view all of my threee Credit reports and scores?
I’m willing to pay a reasonable fee if necessary. I know I can request one from the credit bureaus for free but I want a centralized website to keep track of all 3 of my credit scores and reports. Thanks for the help.

Best answer:

Give your answer to this question below!

Is there a central location to view and print all three of your credit reports?

Question by Is there a central location to view and print all three of your credit reports?
From Transunion, Equifax and Experian? I need copies of all three, but each you must pay 14 to 30 dollars EACH for. Is there one place I can pay One fee and get all of the TRUE reports. I need to dispute a few things on my credit, but I already viewed my free credit reports around 6 months ago, and I am not eligible to view for free.Yes, I already went to and got my reports around 6 months ago, so they no longer let me in. Should I wait until I am eligible again to view for free, and then do my disputes? I just don’t understand my I have to pay for my reports and send them in to the company I got the report from in order to file a dispute.

Best answer:

Answer by finance_loans
www.annualcreditreport.comThis is the government mandated website. You can get allthreeof them for free. Once a year. There is no sign up or cost. They have to give you your report free once a year.UPDATEIf you know what you are disputing just dispute them. When you dispute something they will send you an answer saying why they took it off or why they didnt. You get the credit report either way.

Give your answer to this question below!