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Need for Credit Counselling

23-Nov-2015 written by : FSI-Team

Credit counselling is an effective way to understand and manage your finances better. Additionally, it also educates individuals on how to control and manage debt.

Who can avail of credit counselling?

Not only is credit fairly easy to obtain, it is also extremely convenient to make immediate purchases without having to pay cash. However, debt can get out of hand very quickly, and before you know it you are left wondering as to how you can pay off those hefty credit card bills or loan EMIs.

Globally, credit counselling services are availed of by those individuals who wish to repay off any long outstanding debt they have, and get credit healthy.

Who can administer credit counselling?

Credit health management companies, such as Credit Sudhaar, can offer you credit counselling. Keeping each individual’s requirements in mind, counselling services may vary and are customised accordingly. Counselling options are structured using the client’s personal finance information.

How does credit counselling work?

When you sign up for credit counselling, a professionally trained credit counsellor will be assigned to you. This person will run past your finances with you, and help you understand your spending patterns and how you can better manage them. In addition, they will also put together a plan to slowly start paying off any outstanding debt you have.

Thus, over a period of time, not only will you have a better grasp on your personal finance but you will also be able to pay off any outstanding dues.

Your credit counsellor will also explain to you at length concepts such as budgeting, planning your expenses considering your income and how not to get into a debt trap.

They would also advise you on how to better your credit score, which is an integral part of credit counselling.

Credit score and counselling – are they related?

Very simply, a credit score is a three-digit indictor of your credit health and can play a crucial role when you wish to avail of further credit. A low credit score can have an adverse impact on your credit health.

Some of the reasons a score can be bad or low include –
  • Not making timely payments towards outstanding debt (loans or credit cards).
  • Having skipped payment cycles altogether, thereby increasing your outstanding amount due.
  • Having a high credit utilisation ratio, i.e. the amount you use of the credit limit assigned to you on a credit card each month.
  • Erroneous or inaccurate information on your credit report (of which the score is a part)

How do I know I need credit counselling?

Ask yourself whether the answers to the below questions are mostly ‘yes’. If in the affirmative, chances are that you require credit counselling and would benefit from it.

  • Where does my money go each month?
  • You have reached the maximum limit on your credit cards.
  • You are able to pay only the minimum amount due on your card payments each month.
  • You are unable to make timely payments.
  • You tend to make most of your purchases on your credit card because you can’t afford to pay cash or issue cheques from your bank account.

While not an exhaustive list, these questions can help you acknowledge the fact that you need to better manage your finances. Do keep in mind that credit counselling will not solve all your problems immediately, but over a period of time you would be able to clear off the outstanding debt you have. To begin with, in tandem with your credit counsellor you can work out a debt repayment plan.

Benefits of credit counselling

Here are some of the benefits of availing counselling –
  • Your information is kept confidential. Hence, you can work towards paying off your debt without any data or personal details being compromised.
  • You can start anew by planning your finances well. With counselling, you will be able to better judge just how much is your disposable income, that is how much you can afford to spend vis-à-vis your income and regular commitments (such as monthly household expenses, a child’s school fees etc.)
  • Slowly but surely, you will be able to improve and even enhance credit score. This would mean that when you really do require a loan or credit card in the future, you would be able to avail of one with the best interest rates and other terms.

In conclusion

You should avail of credit counselling in order to better your financial health. While there is no quick-fix, immediate solution over a period of time with your counsellor to guide you, you would be able to see a difference in your credit health, with judicious spending.


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