Credit Counseling
A Real Plan to Get Out of Debt
Credit counseling puts a certified professional in your corner -- someone who builds a real plan to get you out of debt without wrecking your credit.
What Is Credit Counseling?
Credit counseling is a service from certified nonprofit agencies that helps you get a clear read on your financial situation and build a plan to deal with your debt. A counselor looks at your income, your expenses, and every debt you carry, then tells you what your best options are -- budgeting changes, a formal Debt Management Plan (DMP), or possibly something else entirely.
The big draw is the DMP. Through a Debt Management Plan, the agency goes to your creditors and gets your interest rates slashed -- often from 20%+ down to 5-10% -- and late fees waived. You make one payment each month to the agency, and they distribute it across all your creditors.
How Credit Counseling Works
Free Consultation
A certified counselor goes through your full financial situation: income, expenses, debts, and goals. These sessions typically run 45-60 minutes by phone, online, or face-to-face.
Your Action Plan
The counselor builds a plan specific to your numbers. It might include budgeting changes, a Debt Management Plan, or a recommendation to look at settlement or consolidation if those fit better.
Enroll in a DMP (If It Fits)
If a DMP makes sense, the agency contacts your creditors to negotiate lower rates and waived fees. You make one monthly payment to the agency instead of paying each creditor separately.
Stay on Track
The agency sends your payments to creditors each month. You get ongoing support, financial education, and progress reports until every enrolled debt is paid off.
Key Facts
Pros and Cons
Advantages
- Free initial consultation and financial assessment
- Significantly reduced interest rates through DMPs (often 5-10%)
- Waived late fees and over-limit fees in most DMPs
- Single monthly payment simplifies finances
- Minimal credit score impact (accounts noted as "managed" but not delinquent)
- Nonprofit agencies are regulated and accredited (NFCC, FCAA)
Drawbacks
- Monthly DMP fees ($25-50/month in most states)
- Must close enrolled credit card accounts during the DMP
- Full repayment required (no principal reduction)
- Program takes 3-5 years to complete
- Cannot use credit cards enrolled in the plan
- Not all creditors participate in DMP programs
Is Credit Counseling Right for You?
Good Fit If...
- You have mostly credit card debt and want to keep paying in full
- You need help creating a budget and managing finances
- You want reduced interest rates without damaging your credit
- You have a steady income and can afford structured payments
- You prefer working with a certified nonprofit counselor
May Not Be Ideal If...
- You cannot afford even reduced monthly payments
- You need your total debt balance reduced (settlement is better)
- Your debt is not primarily credit cards (DMPs mainly work for credit card debt)
- You need immediate relief from creditor lawsuits
- You are unwilling to close credit card accounts during the program
Frequently Asked Questions
The first consultation is always free. If you sign up for a DMP, most agencies charge $25-50 per month (capped by state law). Some waive fees if you are in serious financial hardship. Stay away from any agency that hits you with big upfront charges.
Ready to Talk to a Credit Counselor?
Compare the top-rated credit counseling agencies reviewed by our editorial team.