Lenders still are looking for better ways to encourage borrowers to seek assistance and learn about homeownership. And the fact that many of them remain confused does not help.
According to the most recent NFCC Financial Literacy Survey, “many consumers have misperceptions about credit counseling agencies, causing confusion that is preventing them from
Knowing why borrowers embrace or resent housing counselors is a short- and long-term challenge for the mortgage industry. Often homeowners struggling with debt and other personal finance issues do not seek advice from an
Differences between counseling agencies and lack of national counseling standards add to the confusion.
The NFCC survey revealed to borrowers which agency to turn to for assistance. They do not know who to trust and how to find legitimate help. Consumers may or may not know they should look for an agency associated with a membership organization such as the NFCC, or that they can check with the Better Business Bureau and their state attorneys general office to see whether there are unresolved complaints filed against the counselor from whom they are seeking assistance, Cunningham said.
For example, NFCC member agencies are required to be accredited by an independent third party, and all counselors must become certified, Cunningham said. Plus, members must adhere to the NFCC’s stringent member quality standards.
Another misconception is that credit counseling costs too much. Apparently many borrowers do not know counseling through various agencies including NFCC members is either free, is low cost, or in cases of true hardship the fee is waived.
Other respondents to the survey did not know their credit score most probably will improve, not deteriorate as they believed to be the case.
Some did not know the goal of the counselors provide both short-term and long-term solutions for consumers through a debt management plan and stated that credit counseling agencies “only offered advice, not real solutions.”
In other cases respondents thought that debt settlement or bankruptcy were better or easier options. They do not know that typically these solutions “have negative consequences for a person’s credit report and score,” Cunningham said, thus should be considered after having first reviewed all other resolution options.
