What is Credit Counseling?
The free service that can show you how to become debt free for free.
Reaching out to someone for help with your finances can be a tough choice to make. Most of us would prefer to solve financial challenges on our own. But if you’re making payments month after month and getting nowhere fast, you may require help to identify the right path to get out of debt.
That’s where a certified credit counselor can become an invaluable resource. They can help you understand your financial situation and the options available to you for debt relief. The information below is designed to help you better understand what credit counseling is and how it can help you get out of debt. If you still have questions or you’re ready to get started, call Consolidated Credit today at or complete an online application to request a free consultation with a certified credit counselor today.
Credit counseling defined
Credit counseling is a financial service that helps consumers identify the right way out of debt. Everyone’s financial situation is different – you have different income and budget needs, different credit scores, different goals and different relationships with your creditors.
There is also more than one way to solve a debt problem – you can consolidate with a balance transfer credit card or loan, you can enroll in a debt management program, or you may need to settle your debts if that option is available.
A credit counselor’s job is to help you match the right debt solution with your situation. Doing so helps you get out of debt faster, while minimizing any cost and credit damage as much as possible. This way, you don’t have to worry that you’ve chosen the wrong solution. You can move forward with confidence knowing you have a debt elimination plan that will work.
What debts can credit counseling help with?
Credit counseling is primarily focused on helping consumers solve problems with high-interest credit card debt, but it can also help with almost any type of unsecured debt. That includes:
- Credit cards
- Store credit cards
- Store credit lines that have gone to collections
- Gas cards
- Unsecured personal loans, including debt consolidation loans
- Medical debts that have gone to collections
- Some payday loans
The credit counselor reviews the debts you have and helps you evaluate which debt solution would work best in your situation. In many cases (if you have a lot of debt and low credit or limited income) the answer will be to enroll in a debt management program.
The credit counseling agency will help you make a plan to pay off your debts that works for your budget. Then they will call your creditors to negotiate. They get your creditors to sign off on your enrollment, as well as negotiating lower interest rates on your debt.
In any case, even with your credit cards, debts can only be included in the program if your creditors consent to accepting an adjusted payment schedule. Credit counseling agencies have established relationships with most major creditors and proven track records of helping people pay off their debt successfully. As a result, major credit issuers are usually quick to accept your enrollment in the program.
By contrast, organizations like collection agencies and payday lenders may not have established relationships with credit counseling agency, so their acceptance of including their debts in the program may not be as guaranteed. However, it’s the job of the credit counseling team to negotiate effectively to get as many of your debts as possible included.
Does credit counseling help with secured debts or other debts?
As far as what a credit counselor can actually help you do it is limited to unsecured debts like the ones named above. However, credit counseling starts a full debt and budget review. In other words, during the initial free consultation the credit counselor will review your debts as a whole. If other debts are causing problems, then the credit counselor can refer you to agencies or other nonprofit organizations that can help you with those. For example…
- If you’re having problems with a mortgage, they will send you to a HUD-approved housing counselor
- If you’re having problems with federal student loan debt, they can direct you to document preparation services for student loan consolidation and repayment plans
Basically, credit counseling agencies are like one-stop referral services for all of your debt problems. You can get a free unbiased expert opinion on the best path you can take to to get out of debt and even if the credit counselor can’t help you enroll in a solution directly they can direct you to other resources that can.
Is all credit counseling free?
If you go through a nonprofit credit counseling agency, the initial debt consultation is always free. So you get credit card counseling, a debt and budget evaluation and a credit check at no charge to you, with no obligation to sign up for anything even if it turns out a debt management program turns out to be your best option. You can take the advice you receive and run with it.
If you enroll in a debt management program, you will need to pay fees for program setup and monthly maintenance. These fees are set based on your budget and rolled into your monthly payments on the program so you’re not burdened with extra bills. Each state has rules to regulate debt management program fees, but fees in all states are capped at $69. In addition, if you are a military service member or veteran, you may qualify for reduced fees on your program.
Are credit counseling and debt counseling the same thing?
Yes. Credit counseling has several names – credit counseling, debt counseling, credit card counseling, debt free counseling. All of these refer to the same service. In any case, regardless of what the service is called, make sure that the company you are working with is certified to provide financial advice.
For example, all credit counselors who work for Consolidated Credit are certified through the Financial Counseling Association of America (FCAA). Counselors are required to go through a comprehensive training period and pass a board exam and ethics test in order to receive certification. All certified counselors must retest every two years to maintain their certification.