The Truth about Consumer Credit Counseling

Credit counseling agencies are not created equal. The fees may be the same, but the services can differ greatly.

At Consolidated Credit, we believe in full transparency about the services that we offer.

Here’s the simple truth: Many consumer credit counseling organizations offer the same services, but they are not all created equal. Some agencies for for-profit while others are non-profit. Creditors nationwide work with most of the agencies and have negotiated rates, but you need to use a reputable service that has your best interest in mind.

How non-profit credit counseling works

Credit counseling agencies receive funding from grants and credit card companies to fund educational resources and debt repayment assistance programs to people who are overburden by debt. These companies don’t want customers to get into further trouble and perhaps declare bankruptcy. Charged off accounts aren’t good for an issuer’s books. So, it’s in their best interest to help customers work out their debt problems.

Consumer credit counseling can answer your questions about debt

One service that is offered by credit counseling agencies is in a debt repayment plan; it’s known as a debt management program. The counselor works with you to find a payment that you can afford and then negotiates with your creditors to reduce interest rates and accept the new affordable payment.

When you go to a credit counseling agency, you agree voluntarily to enroll in a debt repayment plan; it’s known as a debt management program. The agency finds a payment you can afford to make, then negotiates with your creditors to get their sign-off. They agree to an adjusted payment schedule, as well as to reduce or eliminate the applied interest rates.

A second truth about credit counseling

Technically, you can do all of this on your own – you just have to do it individually for each debt. You can call each creditor and try to negotiate lower rates on your own. The may even agree to adjust the repayment schedule.

That happened to Ronnie. He had several creditors and one agreed to work with him, offering 0% and a repayment plan. Unfortunately, he couldn’t get the same kind of deal from his other creditors.

Long-time, loyal customers of a particular credit card company, with a clean history of no missed payments, usually have more success. However, if you missed payments or fell behind recently, they may not trust you can stick with any repayment plan.

Working with a credit counselor shows your creditors that you’re serious. So, the agency can get you better rates even if you tried and failed to negotiate on your own.

2 ways all consumer credit counseling services are the same.

  1. In all cases, your initial consultation with a credit counselor should be free. If an agency tries to charge you, it’s a sure sign of the scam.
  2. Debt management programs are structured the same way, and the main benefit is getting a lower interest rate on outstanding debts. Even debt management program fees are set by state regulations.

Meaning: As you decide which nonprofit consumer credit counseling agency to work with, cost savings or better plans aren’t factors.

So, what’s the difference between consumer credit counseling agencies?

Basically, if the program is the same and the price is the same, your choice should come down to three things:

  1. Service
  2. Support
  3. Resources

You want to work with an agency that has a record of delivering results with the least amount of hassle. It’s also important that you can ask questions and get answers quickly and directly. Finally, they should provide educational resources to help you form better credit habits, teach you how to manage debt and make a plan for financial stability.

Consolidated Credit has been helping people get out of debt since 1993. In 24 years, we’ve counseled 6.5 million people on how to eliminate their debt as quickly and easily as possible.

We also strive to offer everyone free financial resources that help them learn better financial habits.

Personal Finance Infographics

Consolidated Credit regularly publishes infographics that offer an easy visual way to understand key financial topics. You can understand today’s top debt and credit trends and avoid common challenges like how to avoid debt during back to school or winter holiday shopping.

The Game of Good Credit

Financial Education Videos

We have a library of financial education videos that take you in-depth on various financial challenges that consumers face. These videos teach you how to construct an effective budget, how to read your credit report and repair your credit, and more!