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What Is Credit Counseling?

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Credit counseling is a free or low-cost way to fix your finances or overcome a lost job or broken budget. If you need help managing your money, find a government-approved credit counseling agency that offers in-person, phone or online services that will help solve your situation.

Certified, nonprofit credit counselors can help you decide whether to take significant financial steps, such as enrolling in a debt management plan, consolidating your balances or even filing for bankruptcy. Just make sure you compare counselors and their agencies to find the best fit, avoiding credit counseling scams along the way.

How credit counseling services work

The goal of credit counseling is to teach consumers money management skills, so that they can make educated financial decisions going forward. 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 counselor may suggest debt consolidation or help you create a debt management plan (DMP). 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.

What is a debt management plan?
A credit counselor can assist you and mediate with your creditors to create a plan for repaying your outstanding dues. In many cases, you would make payments to your credit counseling agency, which would then pass along the money to your creditors, for a small fee. A debt management plan isn’t the right step for everyone, however. It’s worth talking through all your options with a certified credit counselor.

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 credit counseling services. Even if you’re doing well with money, you can use these services to find out where you could improve your finances.

Credit 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 a credit counseling agency for a debt settlement company. One factor that differentiates counseling agencies from 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’s 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; it 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 strong-arm creditors into settling your debt, but there’s no guarantee it’ll work

The cost of credit counseling

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 counseling agencies offer free debt advice and educational materials on their website; however, 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 credit counselor is the right fit for your needs.

Credit counseling and your credit score

Credit counseling doesn’t affect your credit score, at least directly.

However, some 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 management 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 credit 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 credit 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:

  • $50 by phone (counseling)

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.

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 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, and 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 credit 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 that can indicate that a company isn’t accredited:

  • They promise to remove negative marks from your credit report
  • They pressure you to pay upfront fees for promised services
  • 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 bureaus (Experian, Equifax and TransUnion)

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 you can get a good idea on how much you’ll pay for the services you’ll need.

Federal Trade Commission’s Questions to ask prospective credit counselors

  • What are your qualifications?
  • What are your services and fees?
  • How does your agency make money?
  • Do you have educational materials?
  • Will you help me set plans to avoid my current predicament in the future?
  • Will you keep my information private and secure?
  • What if I can’t afford the costs of credit counseling?
  • Will I need to sign a credit counseling contract?


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 financial 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. Experian, Equifax and TransUnion are required by law (the Fair Credit Reporting Act (FCRA), specifically) to provide you with a free credit report once per year through — plus, these bureaus began providing free weekly reports during the coronavirus pandemic.

In addition, many financial platforms, including LendingTree, will provide you with your credit score for free.

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