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What Is Debt Counseling?

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Accruing debt can weigh heavily on a household, but debt counseling can help. Also referred to as credit counseling, this free or low-cost service helps consumers get their finances on track through money management guidance.

Learn more about how credit counseling can help you reduce your household debt.

How credit counseling services work

The goal of credit counseling is to teach consumers money management skills so they can make educated financial decisions. Credit counseling agencies are usually nonprofit organizations, and their advisors are certified and trained in:

  • Consumer credit
  • Budgeting and money management
  • Debt management, including all types of debt

If appropriate, a credit counselor may suggest a debt management plan or debt consolidation. You’ll have to meet with a financial professional in person, online or by phone to determine the best course of action for your needs.

You don’t need to have bad or fair credit to qualify for counseling, and you don’t need to wait until you’re struggling with debt to receive debt counseling services. Even if you’re doing well with money, you can utilize these services to find out where you could improve your finances.

Debt counseling is required when you file for bankruptcy

If you’re filing for bankruptcy, you’re required by law to obtain credit counseling. You shouldn’t have any trouble finding a certified credit counselor, though. According to U.S. bankruptcy code, the courts must maintain a list of government-approved credit counseling services and instructional personal finance courses.

Credit counseling agencies vs. debt settlement companies

Don’t mistake credit counseling agencies for a debt settlement company. One factor that differentiates credit counseling agencies from debt settlement companies is that accredited counseling agencies are usually nonprofit organizations. See below for more details:

Key differences between credit counseling and debt settlement
Credit counseling agencies Debt settlement companies
Business model Usually nonprofit organizations Usually for-profit companies
Primary service Connecting consumers with credit advice and counseling services Arranging for debt settlement between you and your debt collectors
Cost to consumer Many advisors offer free or low-cost services, as well as free debt advice and educational materials Generally, you’ll pay a fee that is based on the amount of debt that was settled
Tax implications None for repayment plans Depending on your situation, debt forgiveness may have tax implications
Credit score implications Credit counselors will work with you to create a debt management plan, which will show up on your credit report but won’t negatively impact your credit score If your debt settlement company directs you to stop making payments to your creditors, then your credit score will plummet. Companies will try this method to strongarm creditors into settling your debt, but there’s no guarantee that it will work


How much does debt counseling cost?

Initial credit counseling sessions are typically free, but you could pay an enrollment fee and a monthly fee depending on the depth of services provided. Many nonprofit credit counseling agencies offer free debt advice and educational materials on their website, but other services, including setting up debt management and repayment plans, come at a cost.

Any reputable credit counseling agency should provide you with pricing information when asked. Always ask for a free consultation. This way, you can see if a particular debt counselor is the right fit for your needs.

Does credit counseling affect your credit score?

Credit counseling does not affect your credit score. However, some credit counseling agencies may advise that you enroll in a debt management plan, which will show up on your credit report but won’t negatively affect your score. Over time, though, your credit score could improve if you’re making on-time payments to creditors.

It’s important to consider that through a debt settlement plan, you’ll make payments to an agency that will make payments to your creditors on your behalf.

How to find the best credit counseling agency for you

Find an accredited debt counseling service

Many nonprofit counseling agencies approved by the U.S. Treasury Department are also accredited through the Financial Counseling Association of America or the National Foundation for Credit Counseling. There are also hundreds of nonprofits dedicated to consumer financial education listed on the U.S. Department of Justice website, but check out a few online resources below.

Popular government-approved debt counseling services
Nonprofit What sets them apart Costs*
American Consumer Credit Counseling ACCC offers catered services to seniors as well as young adults who are just starting their financial journeys. Veterans and military families will benefit from catered financial services from counselors who are specially trained in this sector. Credit counseling session: Free
Bankruptcy counseling:

  • $49 pre-filing bankruptcy course
  • $39 post-filing bankruptcy course
  • $49 for post-bankruptcy filing home study course (single)
  • $69 for post-bankruptcy filing home study course (married/joint)

Debt management plan:

  • $39 enrollment fee and $5 maintenance fee
Cambridge Credit Counseling Cambridge Credit Counseling offers a variety of services, including student loan counseling. They’re also an HUD-approved housing counseling agency. Credit counseling session: Free
Bankruptcy counseling courses:

  • $39 pre-bankruptcy counseling
  • $39 post-filing debtor education

Debt management plan:

  • Up to $75 setup fee; up to $50 monthly
GreenPath Financial Wellness GreenPath has been in business for about 60 years, and has a wealth of educational materials available on their website for free, including budget spreadsheets, online classes and a debt payoff calculator. Credit counseling session: Free
Bankruptcy counseling courses:

  • $25 online or $35 by phone (counseling)
  • $15 online and $25 by phone (education)

Debt management plan:

  • Up to $50 setup fee; up to $75 monthly fee
InCharge Debt Solutions InCharge has served over 3 million clients. They also have a wide selection of financial literacy materials available on their website. Credit counseling session: Free
Bankruptcy counseling courses:

  • $25 pre-filing bankruptcy counseling
  • $15 for pre-discharge education

Debt management plan:

  • Up to $75 setup fee; $32 average monthly fee
Money Management International The largest full service nonprofit consumer credit counseling organization in the nation, MMI offers an array of niche services like natural disaster recovery and reverse mortgages for seniors. Credit counseling session: Free
Bankruptcy counseling courses:

  • $50 pre-filing counseling
  • $50 pre-discharge education
  • $50 pre-discharge video

Debt management plan:

  • Unspecified one-time setup charge and monthly fees
* Fees are dependent on: 1) the state you live in and 2) the amount of debt you owe. You may qualify for reduced-cost services based on income through some organizations. Fees are accurate as of the date of publishing.

Find an agency that specializes in the debt that you have

Credit card debt counseling isn’t the only option available to you. If you have student loan debt, mortgage debt or even business debt, choose a credit counseling agency that has experience working with people who have been in your shoes.

For instance, the National Foundation for Credit Counseling (NFCC) has a network of counselors who are specially trained and certified in student loan debt. Other credit counselors offer free business debt advice and more resources for small business owners.

Choose a counselor who offers a range of services

Your finances aren’t two-dimensional. Money habits often lean into one another: your credit score and household income affect the amount of debt you can take out, and the amount of available debt you have affects your credit score. Because of this, you’ll want to find an organization that offers diverse services like:

  • Budget counseling
  • Credit advice
  • Financial counseling classes

If you would like to know more about an agency’s services, just ask. Many debt counseling agencies will offer free educational materials, or at least more details about the services they offer.

Avoid credit counseling scams

Some credit repair scams may operate under the guise of reputable credit counseling, so it’s important to see if an agency is accredited before you trust them with your finances. According to the Consumer Financial Protection Bureau (CFPB), these are some red flags indicate that a company isn’t accredited:

  • They promise to remove negative marks from your credit report.
  • They pressure you to pay for services upfront.
  • They ask you to dispute accurate information on your credit report.
  • They fail to explain your rights to you.
  • They recommend that you don’t contact credit reporting companies (Experian, TransUnion and Equifax).

Get a price quote in writing

While many advisors offer free credit counseling consultations and educational materials, ongoing financial wellness services might come at a cost. Shop around for multiple quotes so that you get a good idea on how much you’ll pay for the services you’ll need.

What to bring to your credit counseling consultation

Your credit counselor will want a comprehensive look at your finances to determine the best solutions for your unique situation. To paint a full picture, you should bring:

  • A list of your current expenses. Include fixed expenses, such as car payments and housing, as well as variable expenses like food, utility bills and phone bills. If you have a budget, bring a copy of that, too.
  • Pay stubs going back a few months. Your counselor will want to know your household income.
  • Credit card and loan statements to provide information about minimum payments and due dates.

It will also help to have a general idea of your credit score. Equifax, TransUnion and Experian are required to provide you with a free credit report once per year through And many financial platforms, including My LendingTree, will provide you with your credit score for free.

The bottom line

Debt counseling is a free or low-cost way to manage your finances. If you need help managing your money, find a government-approved credit counseling agency that offers services that align with your situation. When your finances are on the line, you’ll want a reputable, accredited debt advisor in your corner.


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