What Is Credit Counseling?
Credit counseling is a service provided by nonprofit organizations that helps you manage your debt through budgeting assistance, financial education, and debt management plans (DMPs). Certified credit counselors review your financial situation and create a plan to help you pay off debt without the negative credit impact of settlement or bankruptcy.
How Credit Counseling Works
A certified credit counselor reviews your income, expenses, and debts during an initial session (often free). They may recommend a debt management plan where the agency negotiates lower interest rates with your creditors—often reducing rates from 20-30% to 5-10%.
You make a single monthly payment to the counseling agency, which distributes payments to your creditors. Most DMPs take 3-5 years to complete, with typical monthly fees of $25-75.
Benefits of Credit Counseling
Credit counseling through an accredited nonprofit offers reduced interest rates, waived late fees, a single monthly payment, financial education, and minimal credit score impact compared to settlement or bankruptcy. Most agencies are accredited by the NFCC (National Foundation for Credit Counseling) or FCAA (Financial Counseling Association of America).
Is Credit Counseling Right for You?
Credit counseling is ideal if you want to pay back 100% of what you owe at reduced interest rates, need help creating a budget, have mostly credit card debt, and want to protect your credit score while getting out of debt.