USDA Home Loans Blog

There is no question, that many people are in need of some sort of credit counseling.  People can get to the point of desperation when bill collectors are calling every day, and collections agencies badgering and making them feel worthless.  Seeing a commercial on TV for credit counseling may seem like the answer they are looking for.  They promise to STOP the bill collectors, lower your interest rates and lower what you pay monthly.  They promise to help you "better your credit situation".  However, they don't warn you of what it will do to your credit in the meantime, or explain how long it will take your credit to recover.  Each month you may be making your payment to the counseling agency on time, assuming that you are getting a good credit reference form this and paying your other debt on time.  Unfortunately this is not the case the majority of the time.  If they negotiated a lower interest rate and a lower payment than your required minimum payment each month, then your credit report will continue to show that debt in a delinquent manner.  It will show consistently behind, and getting further behind by the month.  That kind of reporting is harmful to your credit.  Furthermore, your credit report will show that you are in a debt management program, which not only hurts your credit, but mortgage lenders will then consider you a higher risk borrower.  It is assumed by lenders that you can not manage your debt on your own and loaning money to someone who can not manage their own debt is risky business.  Buying or refinancing a home while in consumer credit counseling is almost impossible.  Most lenders will require a "release" or "discharge" from the agency in order to proceed with your loan.  If you own your own home and have some equity, see if you can refinance to consolidate your debt before resorting to consumer credit counseling.