Credit Counseling

Finding yourself with credit problems is easy. Getting out from under debt can sometimes be a little more difficult. However, there are solutions. One of which is credit counseling.

Working with a Credit Counseling Service

Certified Credit Counselors are personal credit counselors who are able to look at your financial history and design a plan that will balance your expenses and debts with your income and financial goals. They have been specifically trained in subjects such as counseling, budgeting, credit and collections, and debt management.

Here’s how it works. After reviewing your financial situation, your counselor will offer you possible solutions and help you develop a monthly budget, taking into consideration your current living expenses and your debt to creditors. You will learn to rid yourself of unnecessary expenses, develop better credit habits, and live within your means, and all in a confidential manner.

Fees for credit counseling services vary widely and may include:

Service Type

Typical Fee


Enrollment fee$0 to $75AICCCA caps these fees at $75, while NFCC members average $19*
 Monthly fee$0 to $50AICCCA caps these fees at $50, while NFCC members average $12. May be a flat rate or an amount based on number of accounts*
 Education fee$0 to $20Pays for materials to help you learn how to manage your finances
 Voluntary contribution


Often used to get money while avoiding state fee limits; just say ‘no’
Debt Management Plan fee$0 to $50Set by state

*Caps on fees regulated by state

When you look for a credit counseling service, be sure to:

·      Choose an accredited agency. In the U.S. that means accreditation by the Council on Accreditation (COA) or the International Organization for Standardization (ISO). In addition, they should belong to the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

·      Ask if they are licensed. While not all states require licensing if your state does you need to be sure the service meets this requirement.

·      Find out about complaints. Check with the Better Business Bureau. Their reliability report on the company will provide information on all unresolved complaints. Additionally, check with your state attorney general and any regulatory authorities.

·      Ask lots of questions. Before you hand over any money or personal information, a reputable credit counseling firm will answer your questions, such as the certification and qualifications of their counselors and the confidentiality and security of your personal information.

Creating a Formal Debt Management Plan

One part of the credit counseling process may be to develop a formal Debt Management Plan (DMP). Though you can choose to get help with a budget only, a DMP has advantages. They frequently offer improved credit terms, lower interest rates, and reduced or waived charges with your creditors, making it easier to repay your debts.

Your credit counselor will design a DMP specific to your personal situation by arranging a payment schedule for how you will repay your debts. You voluntarily agree to deposit a set amount each month with your credit service. Your credit service then distributes these funds to your creditors according to the schedule.

It is important to note that participation in a DMP may have a negative effect on your credit rating. However, creditors have different credit reporting policies. Your counselor can answer any questions you have about the impact on your creditworthiness.

Keep in mind that you cannot use your lines of credit while you are repaying them through a DMP. In fact, some experts suggest closing these accounts to avoid temptation. Your goal is to get out of debt.

Finally, only unsecured credit accounts, such as credit cards or an unsecured personal loan, may be included in a DMP. Home and car loans, unpaid medical bills, and similar debts are not eligible.

Credit Counseling Isn’t for Everyone

There are a number of benefits in using credit counseling, including what you learn about how to manage your finances as well as the possibility of lowering your overall debt and getting out of debt sooner. However, it is not something that you should enter into lightly.

One of the hardest hurdles that many people face is the commitment. If their debts overwhelmed them before, it can happen again. Plus some creditors perceive credit counseling as a red flag when it comes to future credit.

Before you decide, make sure you research all the facts. For more information on choosing a credit counselor, check out the Federal Trade Commission’s FactsforConsumers or at

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