The recent study released by the Urban Institute reveals that 35% of Americans have accounts in collections. So what keeps consumers from reaching out for help?
NFCC member agencies assisted more than 1.5 million people last year with their financial concerns, but that is a only a fraction of the 77 million Americans who have debt in collections. It is a shame that so many are struggling financially when help is easily accessible and affordable.
Consumers may be hesitant to reach out for help due to misconceptions about financial counseling. Below are some of the false beliefs that consumers admitted in the 2014 NFCC Financial Literacy Survey:
- Financial counseling costs too much. The truth is that counseling through an NFCC member agency is either free or low cost. One of the requirements for agency membership in the NFCC is that no service will be denied based on an inability to pay. Cost should never be a barrier to finding the financial help needed.
- It would be embarrassing to discuss my situation. It is highly likely that the trained and certified financial professional you visit with has encountered a financial problem similar to yours, and is skilled at resolving comparable issues.
- Financial counseling agencies only offer advice, not real solutions. Although financial education is critical to financial success, when a person has debt beyond what he or she can responsibly manage, NFCC members do offer concrete options, such as a Debt Management Program (DMP). A DMP allows consumers to continue to service their debt, repaying it in full, but often with a more affordable monthly payment, a lower interest rate, and late fees and over-limit fees stopped or lowered.
- Seeking credit counseling might damage my credit report and score. Credit counseling is not reported to the credit bureau, thus could not have a negative impact on a person’s credit report or score. However, if a person elects to repay their debt through a DMP, the creditor may make a notation on the credit report of participation in the program. Nonetheless, graduates of the DMP often emerge with improved credit scores due to having paid off the debt through consistent monthly payments.
- Debt settlement or bankruptcy seems like better solutions. Both debt settlement and bankruptcy are serious financial decisions which can negatively impact a person’s credit report and score for years. Before opting for either, a person should first rule out all other alternatives.
There are severe financial consequences resulting from unmanageable debt, realities that should not be ignored. Consider the following:
- A blemished pay history reflecting late or missed payments tarnishes a person’s credit report which could result in a lower credit score;
- A low credit score often equals a higher interest rate when borrowing money, making the cost of credit more expensive, and
- A negative credit record could diminish access to additional credit needed for emergencies or unplanned expenses.
Further, the stress of unmanageable debt has destroyed marriages, shattered families, and contributed to lost jobs. No one ever scripts financial ruin as a part of their life plan, but when financial distress occurs, it is a very real part of a person’s daily activities, as debt is a burden people carry with them 24 hours per day.
The NFCC, the nation’s largest and longest serving network of nonprofit financial counseling agencies, stands ready to help all American families who are struggling with financial issues, whether they be around debt, housing, foreclosure prevention, or simply creating a workable monthly budget.
Don’t delay seeking help. Finding answers and solutions to your financial concerns starts by reaching out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or find an agency online at www.NFCC.org.
Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.