What is Credit Counseling and How Can It Help?

Credit counseling can be an incredibly helpful tool for folks struggling with debt or other money problems. Let’s break down exactly what credit counseling is, who provides the services, and how it can help you get your finances back on track.

What is Credit Counseling?

Credit counseling involves sitting down with a professional credit counselor to go over your financial situation. The counselor reviews your income, expenses, debt, and credit reports to get a full picture of what’s going on.

Then, the counselor works with you to come up with a personalized plan to tackle your money issues. This could involve:

• Creating a budget
• Setting up a debt repayment plan
• Negotiating lower interest rates on debt
• Providing tips for saving money
• Giving advice on managing credit and improving credit scores

The counselor acts as an educator and coach — helping you understand the root causes of your financial troubles and motivating you to take positive steps forward. Many agencies also offer free educational resources like workshops or online classes.

Who Provides Credit Counseling?

Most credit counseling agencies are non-profit organizations staffed by certified counselors. Many are affiliated with organizations like the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).

When looking for an agency, stick to non-profit groups to ensure the counselors are ethical, trained, and offering services designed to help — not make a profit. Be wary of for-profit companies advertising credit repair services for a fee.

Ask friends or family for recommendations on reputable agencies. Or search online and check reviews. Make sure any agency you consider is licensed in your state.

How Can Credit Counseling Help?

There are many ways professional credit counseling can help you regain control of your financial life:

Budgeting Assistance

One of the most useful services a credit counseling agency can provide is helping you create a realistic budget. Their counselors are experts at assessing expenses and identifying areas where you may be able to save.

They can also assist with tools and strategies for sticking to your budget. This can be invaluable in stopping overspending and getting your finances on track.

Debt Management

A large part of credit counselors’ work involves developing debt repayment plans. These debt management plans serve a few key purposes:

• Consolidating multiple payments into one monthly payment
• Negotiating lower interest rates with creditors
• Establishing a set repayment timeline (typically 3-5 years)
• Stopping collection calls from creditors

While debt management plans do charge a monthly fee, the savings on interest and convenience of consolidating can make it worthwhile for folks struggling with high-interest credit card debt.

Student Loan Counseling

Most agencies also provide student loan counseling to help borrowers understand repayment options and strategies to pay off student loans faster. They can help you assess options like income-driven repayment, deferment, forbearance, and student loan forgiveness programs.

Housing Counseling

Non-profit credit counseling organizations frequently offer housing counseling services including:

• Advice on buying a home, including programs for first-time home buyers
• Foreclosure prevention counseling
• Reverse mortgage counseling

These services are often free and can provide guidance on navigating major financial decisions relating to your housing situation.

Bankruptcy Counseling

Many agencies provide the mandatory credit counseling and debtor education required to file for bankruptcy. The counselors help you understand bankruptcy and its consequences before moving forward.

They may also discuss alternatives to bankruptcy that may work for your situation. This can help prevent filing as a knee-jerk reaction to debt troubles.

Financial Education

Along with individual counseling, many agencies also offer free educational resources like online classes, videos, articles, workshops, and more. These can help you build your general money management skills.

Common topics include budgeting, understanding credit, identity theft prevention, and saving for retirement. Improving your overall financial literacy goes hand-in-hand with overcoming current money challenges.

The Bottom Line

Credit counseling provides professional guidance and structure to help you tackle debt, improve credit, and master personal finance skills. Services are often free or low cost. And counselors are trained experts whose job is helping you achieve financial stability.

Don’t struggle alone. Reach out to a reputable credit counseling agency. With commitment and hard work, you can get back on the road to financial freedom.