A study from the Urban Institute revealed the troubling statistic, but the National Foundation for Credit Counseling (NFCC) says that only 1.5 million of those 77 million people contacted them for help last year.
To find out why, the NFCC conducted a survey asking folks why they were reluctant to reach out for financial counseling. The 2014 NFCC Financial Literacy Survey revealed the following reasons, all of which are actually myths:
- Getting help costs too much. Many people think that getting debt counseling or financial advice will be costly. In fact, counseling with the NFCC and similar nonprofits is free or low-cost.
- Getting help is embarrassing. Reluctance to ask for financial help often stems from feelings of shame or embarrassment. People said they were afraid to reach out for this reason, but the truth is, financial counselors have seen and heard it all. There is no reason to be embarrassed to seek financial help.
- Getting advice, not real assistance, is the only point of financial counseling. On the contrary, financial counselors don’t just give advice. They can help people set up plans to pay down debt, contact creditors, and help them enroll in debt management programs. This can help with late fees, high interest, and other problems associated with having debts in collections.
- Getting help will negatively affect credit scores. People were afraid that seeking financial counseling would impact their credit report and keep them from getting credit in the future. However, financial counseling does not impact your credit score. If you enroll in a debt management program, this may be noted on your credit report, but it usually does not have much negative impact on the overall credit score—especially if the person is paying off their debt due to the program.
- Bankruptcy or debt settlement seem like the only answers. Debt settlement and bankruptcy may seem like easy solutions, but they will have a huge impact on your credit report for years to come. This can mean not being able to buy a house or a car, get a business loan, even rent an apartment or get a job. Before going to such drastic measures, all attempts should be made to pay off debt in another way. Financial counseling can help.
The NFCC encourages people with heavy debt loads to contact them or another nonprofit consumer credit agency for help with their finances, and not believe these myths.
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