Non-profit credit counselors help people review their financial situation and find ways to build a successful financial future.
Feeling financially stuck is common. Millions of Americans live paycheck to paycheck, making their monthly payments, but their balances either go up or don’t budge. Others gradually chip away at their balances but wish they knew how to pay off their debts faster. Consumer credit counseling can help.
Consumer credit counseling services are recommended for people in serious financial trouble. But, they are also a valuable resource for people who need affordable, unbiased financial advice.
From budgeting, financial education and credit reviews to crafting personalized debt management plans and working with one’s creditors, certified credit counselors offer practical coaching and trustworthy advice.
This article addresses the question: What is credit counseling? Find out how it works and learn about the services provided by nonprofit credit counseling agencies (CCA).
What is credit counseling?
Consumer credit counseling involves meeting with a certified credit counselor to discuss your finances and identify affordable ways to better manage your money and pay off debt.
Credit counselors work with you to review your full financial picture and create a personalized plan to help you meet your goals – whether it’s getting out of credit card debt, building an emergency fund or adjusting your budget.
A reputable CCA should always have its credit counselors trained and certified in budgeting, debt management and consumer credit. They should also be licensed in the state where services are offered and be a member of the Financial Counseling Association of America (FCAA). The FCAA requires that its members follow strict operating standards and consumer protection guidelines to safeguard consumers.
Your free initial credit counseling consultation will give you a better understanding of your finances, a personalized action plan, tools, resources and clear next steps. This may include a debt management plan, if applicable.
Certified credit counselors are legally required to present consumers with the best solutions for their debt so they can trust the advice they receive.
How does credit counseling work?
Start by finding a credit counseling agency in your state. Connect with an FCAA member agency here.
Next, you can prepare for your consultation using FCAA’s Debt Freedom Tool.
When you connect with a CCA, you will receive a free consultation. This initial counseling session will always be free of charge and should never require you to sign up for a service.
The initial counseling consultation will last 30 to 90 minutes. During the call or web chat, you will provide:
- Your name and contact information
- Information about your financial situation and history
- Your income and assets, as well as your expenses and any debt
- Your permission to do a soft credit inquiry
With this information, the credit counselor will review your financial situation and perform a full budget and debt analysis. All of this information is very important to analyze and build the best possible personalized plan for your specific financial needs and goals.
The counselor will then help you understand the recommendations, which may include a debt management plan. You will never be pushed to sign up for a plan and will always be presented with the best possible solution for your situation.
If a debt management plan is the best solution, the counselor will help you determine a monthly payment plan that fits your budget. They will work with your creditors to lower interest rates and fees and provide a timeline to pay off your debt.
There may be initial set-up or monthly fees for more complicated services like creating a debt management plan, bankruptcy-related services or student loan counseling. The government regulates these fees. Make sure to get all verbal promises in writing and read the contract carefully before signing.
Your credit counselor will work with you through the process as you develop healthy financial habits and money management skills.
Services offered by credit counseling agencies
Making wise financial decisions can be challenging, but you don’t have to do it alone. FCAA is comprised of non-profit credit counseling organizations specializing in helping people with money management, budgeting, credit, debt management and more.
Budgeting
Credit counselors can help you create a budget that fits your situation and unique financial needs while also addressing the root causes of debt.
Financial education
CCAs offer many forms of financial education. From workshops, videos and podcasts to articles and infographics, many free resources are available. The FCAA even offers a Debt Freedom Tool to get you started with a budget. This budgeting tool helps you review your financial situation and prepare to meet with a credit counselor.
Credit analysis
Consumer credit counselors can pull your credit reports without damaging your credit. They can share the results with you and use the information to help inform the personalized plan they create for your situation.
Debt management
Debt management plans combine multiple debts into a structured repayment program with a lower, single monthly payment.
If a debt management plan is the best solution for your financial situation, your credit counselor will work with you to identify a monthly payment you can afford. Then, they will work with your creditors to decrease or eliminate interest charges and/or fees.
You may see a slight dip in your credit score initially, but then you start building a great payment history since your creditors will be paid each month.
Working with creditors
When a consumer enters into a debt management plan with a CCA, the credit counselor connects with the consumer’s creditors to reduce interest rates and waive fees. Creditors are generally receptive because they want to get their money back.
Advice on other financial topics
Credit counselors are specially trained to help people with all kinds of financial challenges and debt. If you have questions about student loans, home mortgages, buy-now-pay-later plans, bankruptcy or tax debt, a non-profit credit counselor is a great resource.
So, what do credit counselors do? Find out by contacting FCAA
If you’re ready to start working with a credit counselor, we can get you connected. FCAA member agencies can help you meet your financial goals and escape the debt trap. Contact us today to learn more!