Free Consumer Credit Counseling

A certified credit counselor can help you find an easier way to get out of debt.

How do you know if you need credit counseling?

Nonprofit consumer credit counseling services exist to help consumers who are struggling to get out of credit card debt. They evaluate your debts, credit and budget to help you find the right best solution for your needs and goals. Since most people don’t know about the various debt solutions that they can use until they need them, certified credit counselors are there to help fill the gap.

If you have multiple credit card balances that you need to pay off and you aren’t sure about which debt relief option to use, then free credit counseling is for you.

What is credit counseling?

Consumer credit counseling services are not a debt solution in and of itself. It’s a service intended to help you identify the best possible debt solution for your needs. In that sense, credit counseling is essentially a consumer advocacy service. A credit counselor is there to help you make the best possible plan to get out of debt in a way that works for your budget.

How does credit counseling work?

Step 1: Make a free, no-obligation, toll-free phone call

When you finally get fed up with your debt, pick up the phone and call a nonprofit consumer credit counseling service. The call takes about 30 minutes to complete the evaluation. The counselor will ask for some basic information and then ask for you to explain your situation.

This step is crucial because it helps the counselor understand the root cause of challenges with debt. That way, they can help you make effective plans to get out of debt – and to stay that way.

Step 2:  Get a free debt and budget evaluation

Next, you and your credit counselor will dive into your financial situation. They’ll get details about your debt – how much you owe, who you owe and what your interest rates are. They’ll also gather information about your income and budget.

They’ll also ask for the last four digits of your Social Security number, so they can do a soft credit pull. This means they’ll check your credit report to see where your credit stands. This soft pull doesn’t affect your credit score.

 

Step 3: Customize a plan to get out of debt

Finally, the counselor will help you understand your options for getting out of debt. Credit counseling services can help you set up a debt management plan. However, as long as you work with a nonprofit credit counseling agency, they won’t push you into that solution. By law, if there are other solutions that would work better in your situation, they must recommend it. They can advise if you’d be better with a debt consolidation loan or if you may be better off filing for bankruptcy.

If a debt management program is your best option for getting out of debt, the credit counselor will help you find monthly payment that works for your budget. Then they get to work negotiating with your creditors. They focus on reducing or eliminating the interest rates applied to your debt and stopping any penalties and fees. This makes it faster and easier to pay off your balances.

How much does credit counseling cost?

First credit counseling sessionFree
Debt management programFees vary by state, capped at $79 nationwide

With nonprofit credit counseling services, the initial credit counseling sessions are always free. You are not obligated to sign up for anything. That means you can get an expert opinion on your debt and the best way to get out of it without incurring another bill.

Once you decide to enroll in a debt management program, there is are setup and monthly administration fees. Nationwide, those fees are capped at $79, but most people end up paying about $40. These fees are relatively low compared to other solutions, like debt settlement.

How consumer credit counseling impacts your credit

As long as it’s done correctly, credit counseling and enrolling in a debt management program should have no negative impact on your credit score. The credit check done during your free credit counseling session is a soft pull, so the credit inquiry will not have any negative effect.

Even if you decide to enroll in a debt management plan, it should still have a positive or neutral effect on your credit. Since your creditors agree to accept reduced payments through the credit counseling agency, you build a positive payment history on your credit report with each monthly payment you make. Paying down your balances also improves your credit utilization ratio, which is the second biggest factor in calculating your credit score.

What to look for to find the best credit counseling service

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

  • Make sure the agency is rated highly by the Better Business Bureau.
  • Check consumer reports and independent third-party reviews online.
  • Make sure the organization is a member of an accredited trade association. Consolidated Credit is a proud member of the Financial Counseling Association of America (FCAA), formerly the Association of Credit Counseling Professionals (ACCPros).
  • Find an agency that has a proven track record of working with the creditors that you have accounts with.
  • Ask what financial education materials they offer. A good agency will help you learn better money management skills, so you can avoid challenges with debt in the future.
  • Then get a feel for the company in your free credit counseling session. If you don’t feel comfortable and confident in the service, remember that you’re under no obligation to sign up for anything

Credit counseling FAQ

Can I complete credit counseling online?

You can start the credit counseling process online by completing a free debt analysis form. This will provide all the basic information that a credit counselor needs to complete your free credit counseling session. However, after that, you will need to talk directly to the credit counselor. That’s easiest over the phone.

After you enroll in the program, you’ll be able to track your progress and communicate with the client services team through Consolidated Credit’s online members portal.

Does credit counseling work for debt collections?

Yes. Although it’s primarily intended for debts that are still with the original creditors, credit counseling can help with collections. It may also be able to help with unpaid medical bills, unsecured loans including debt consolidation loans, and even some payday loans. Credit counseling does not work for debts that have collateral, such as your mortgage or auto loan, or for student loan debt.

Do my spouse and I have to go through credit counseling together?

That depends on your accounts. If you hold accounts jointly, then you would need to go through credit counseling and debt management program enrollment together. If you maintain separate accounts and only wish to enroll your debts, then you can do credit counseling without your partner.

Get more information on financial counseling for couples »

Is credit counseling the same as bankruptcy counseling?

No. When filing for bankruptcy, you are now required to go through a specialized credit counseling program known as pre-bankruptcy counseling. Pre-bankruptcy counseling is a required 60 to 90-minute session that has a fee of around $50. Fees vary by state and may be waived if you can’t afford to pay. But this is different from the free credit counseling session that you receive from a nonprofit consumer credit counseling agency.

Contributors :
April Lewis-Parks [email protected]Director of Education and Corporate Communications
Meghan Alard [email protected]Financial Literacy Specialist