When do you use debt counseling? Must you use financial counseling if you want to go through bankruptcy? What is the overall purpose of financial counseling? These are the three main questions I see a lot when it comes to the concept of counseling for financial improvement. Given the frequency with which I see these questions, the answers must be explained in detail to help you better understand what can sometimes and often is misconstrued.

Financial counseling exists for anyone who would like to get a second opinion on their expenses and income. This counseling option is not specific to individuals that are suffering from too much debt or those who may be filing for bankruptcy soon. Anyone can take advantage of financial counseling. There are plenty of government offices that provide pro-bono work. These not for profit agencies will have you outline all of your expenses, income, and retirement accounts. This includes any incidentals you may have throughout the year. You will have to look at what you owe, what income comes in, what you pay out in a year, and what you pay out each month.

The plan examines everything including what you spend on groceries, gas, and eating out. Debt counseling can then take the information to work up a debt management plan whether it means getting financial assistance like a debt settlement or just determining how you can start to lower your bills.

With counseling, you may find that you eat out with $400 every month and you spend twice that in groceries. As you reflect on the expense of $1200 for food you realize you have four people in your family, and there are ways to reduce how much you eat out or at least how much you spend total on food because you tend to throw out too many groceries some months when you dine out more. The point is that sometimes we spend more than we need to because it gets thrown out or we may not have needed something that we bought. Counselors look for these things to help you streamline your expenses. Even if you are not in debt or a financial squeeze you could be saving income rather than wasting it, which is why you might seek counseling even when you are not facing bankruptcy or judgments against you.

For those that have to seek bankruptcy because they waited too long to start gaining control of their expenses or because of a lost job or other issues they will have to use debt counseling first. In 2007 when the economy started to fail the bankruptcy laws were changed. Anyone who wanted to go through bankruptcy would first have to go through financial counseling. It is a means of deterrent. If someone is educated in how their spending habits create a debt situation then they may not be in a situation of going through bankruptcy again and thus counseling is designed to help as a beginning by debt relief solution.

Look Beyond your Debt to Build Credit Again

For those who have suffered from debt problems, it might not seem like there is an answer to gain financial stability. Often if you have had creditors after you or gone through a bankruptcy your credit scores will be in a bad rating. You might also have bad scores if you have a lot of debt. Revolving credit is the worst to have. This is because it is unsecured and often on credit cards. It can look very bad if you are trying to get a loan or other financial product. This is even the case if you are in good standing with your creditors. There is a way you can build credit again.

Make certain that you have paid down your financial obligations. It is important to get your debt out of the way before you can repair your financial scores. You want to eliminate your debt before you consider getting better reports from the agencies. Also, you might try finding an acceptable solution to debt help. The only way the scores will start to go up is if your obligations go down. There is one other way. If you pay off a mortgage, car loan, or other loans your scores can increase. This is because you have paid off an entire loan. These types of secured loans count greatly with your credit scores. This is due to the type of debt it is. A secured loan unlike credit card revolving debt helps you build credit. If you do not have any credit whatsoever a car loan can establish this pattern. As long as you do not default on the car or mortgage amount you borrowed it will certainly help.

After you have paid down your debts, you can begin to build credit again. You may want to keep one credit card. If this is at all possible make certain you only use it once a month for a payment amount you can pay off immediately. If you do not keep a balance on the card and pay it off each month you will see your scores increasing.

The best thing you can do is always pay off your debts quickly and in full with credit cards. It is not just to build credit, but also to make certain you do not incur debt again. The thing about credit cards is that we tend to depend on them. Staying away from them at all costs is a good idea. Additionally, just having one for emergencies that you use to rebuild your financial status is a good idea if you can control your spending.

It doesn't take much to completely ruin your credit. It does take a long time to build credit back up again. If you have shown you can be a risk then you will be looked at unfavorably. It doesn't mean there is not away. For example, credit unions are usually more likely to provide you with new loans than a larger bank. Just know that there are ways around a low credit score and you can find a way to buy the house you want and get a decent deal on a bad credit mortgage from the bank.