How to Become Debt Free With a Debt Management Plan in Idaho

Find a Credit Counseling Agency

Before choosing a credit counseling agency, do some research. First, find a few credit counselors to research and compare. Look to see if the agency is a nonprofit organization. Nonprofits that are accredited have to meet certain quality standards. You can find out if a credit counseling agency is accredited by visiting the NFCC or COA websites. The COA is the organization that does the accrediting. The National Foundation for Credit Counseling, or NFCC, is the longest-running nonprofit financial counseling organization in the United States. NFCC member agencies have to be certified. Beyond those two organizations, check with the Idaho Attorney General’s office for complaints. You can also search for the organization through the Better Business Bureau to see how reputable they are. Before signing up for a counseling session, make sure they don’t charge you. The initial sessions are always free. You should also determine what they will need for your first session and how long it will last. During your initial credit counseling session, you will also want to ask your counselor some questions. Find out what they do if you can’t afford their fees. Ask how the counselor is compensated. You will want to avoid counselors who make a commission based on how many people they sign up. Ask your credit counselor for free informational materials before signing up. You will want to review your options before making a decision. Finally, have your counselor tell you about how they differ from other agencies. You will want to find a counseling agency that offers services that benefit you. Agencies may offer online access to your account or post-counseling services which you may value.

What to Expect at Credit Counseling

Once you’ve chosen a credit counseling agency, get yourself ready for the first counseling session. Make sure you have relevant information handy. Gather recent bank account statements. Look for your past few paycheck stubs. Pull your credit report from one of the credit bureaus and gather your bills. Creditor bills should include information like your account number, amount owed, interest rates, and minimum payments. You should also get an estimate of your other ongoing monthly payments. For your first counseling session, you’ll talk to a certified credit counselor over the phone. In-person sessions exist but are less common. Your counseling session will be confidential. You’ll be having an open conversation about your financial situation. This is a conversation, not a lecture. Each session takes about 45-60 minutes. During this time, your counselor will assess or your finances. You’ll give the counselor an overview of your income, expenses, and debt. You’ll work together to establish financial goals and an action plan to achieve those goals. Creditors do not take part in the initial session. Creditors are not notified you even called. Depending on your action plan and your debt relief goals, the credit counseling agency may recommend a debt management program, or DMP. 

Making the Decision & Getting Started

Going forward with a debt management plan is a big decision and major commitment. The credit counselor may determine you qualify for a debt management plan. Take your time to decide if this is right for you. A good credit counseling agency will not pressure you into making a decision. They know the choice is up to you. To help make a decision, find out a little more about the debt management plan. Ask the counselor what they charge for a set-up fee or a monthly fee. Ask the counselor about Idaho’s limits on these fees, if any, and what they are. Find out if the counselor gets any incentives for signing you up for different options. Finally, ask if they have good relationships with your creditors. Different agencies work with different creditors. Make sure yours are a good match. You’ll also want to ask yourself a few questions before committing to any plan. If you know you can’t stick with a budget, you may want to try some other debt relief options. Talk with family members to see if they are on board. You may have to cut spending which will impact your shopping habits. You have to be committed to making the monthly payment on time. Missing payments could result in additional fees or a worse financial situation. Look around and evaluate other debt relief options available in your area. Depending on your total debt amount and other monthly expenses, you may want to speak with a bankruptcy attorney. Bankruptcy could be a better alternative in your situation.

Put Together Your Idaho Debt Management Plan

Once you commit to an Idaho debt management plan, your credit counselor will need additional information from you. They will want your bank account information and more detailed credit card account information. Your credit counselor may even ask for your cardholder agreements from each of your credit card companies. A cardholder agreement is a contract between you and your credit card company. The agreement has all the details of the financing and payment terms of your credit card. These outline the interest rates and fees on your cards that may affect your debt management plan. You can usually locate the cardholder agreement with the information initially sent with your credit card. You may also find copies on your credit card company’s online portal. The Consumer Financial Protection Bureau has sample agreements available on their website.

Creating your Idaho DMP is one of the most important parts of the process besides making the payments on time. You’ll work out the details and create a due date that works for you. Get details about the plan from your counselor. Determine how often payments will come due. Ask if you can make bi-weekly payments that line up with your paydays. Find out what you’ll be paying for the monthly fee. If your plan doesn’t pay creditors right away, determine what to do about debt payments that become due in the meantime. Missed payments may reflect poorly on your credit report. On the other hand, double payments will put a squeeze on your finances. Your counselor will know the best options for these questions. Lastly, your creditors may also have a say about your plan. Your credit counseling agency will contact your creditors once you have come up with a plan that they think will work for you.

Begin Payments

Be clear about your repayment plan amount and the due date for the payment. Talk to your credit counselor to verify the dates. Take the first few weeks of your Idaho DMP to set up a process for following your budget. Verify your monthly expenses are covered in addition to the repayment plan amount. Your credit counseling agency will establish the plan with your creditors and work out agreements with them. Credit counseling agencies have established relationships with lenders. They should be able to tell you approximately how long this process will take. Check-in with your counselor often to get updates about the status of your plan. Creditors will begin to close your accounts as part of the DMP. Your FICO credit score may initially dip as you decrease your amount of available credit. Once your balances decrease, your credit score will begin to rise. The debt management plan will show on your credit report, but will not impact your overall score. 

How to Stay Current With Your Idaho Debt Management Plan

Once you start making payments, do everything you can to keep them current. At this point, you should have set your due date at a time when you’ll have funds available. Avoid setting due dates at the same time as other monthly expenses like mortgage or car loan payments. As part of your budget, set aside some savings in case of unexpected expenses. Hot summers or cold Idaho winters could cause utility payments to rise unexpectedly. Make sure you have the funds to cover these one-off costs. Look at online budget tools or manually track your expenses. Study your monthly debt management plan reports closely. Ask your counselor about big milestones during your plan. Don’t wait until the end, celebrate when you hit an important milestone. If you have an emergency, communicate with your credit counselor. They may have a recommendation in your circumstance. Use your emergency funds when necessary, but replenish them if they’re spent. If you have to use a credit card in an emergency, make sure it doesn’t violate the terms of your DMP. Even if it doesn’t, pay it off as soon as possible to avoid further trouble.