What Is Credit Counseling?

What Is Credit Counseling?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

Credit counseling is a service that assists individuals in managing their debt and improving their financial situation. It’s typically provided by non-profit agencies that work with you one-on-one to provide personalized advice on your financial situation. These agencies work with you to develop a comprehensive budget and provide resources and tools to help manage spending and reduce debt. Credit counseling can include services like debt management plans, financial education, and bankruptcy counseling. The overall goal is to help you regain control over your finances and set a clear path towards a debt-free lifestyle.

Related Questions

1. How does credit counseling affect your credit score?

Credit counseling in itself does not impact your credit score directly. It’s the actions taken from the recommendations during counseling that could have an impact. If you opt for a debt management plan and make regular, on-time payments, it could potentially improve your credit history over time.

2. Is credit counseling free?

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Many non-profit credit counseling agencies offer free advice and workshops. However, specific programs such as debt management plans may require a fee. Be sure to ask about costs up front before agreeing to any services.

3. Who should consider credit counseling?

Anyone struggling with debt management should consider credit counseling. It can also be beneficial for those who find it difficult to budget or who are considering bankruptcy.

4. How long does credit counseling last?

The duration of counseling varies according to individual financial situations, but initial sessions usually last around an hour. If you partake in a debt management program, it can last anywhere from three to five years.

5. What is a debt management plan?

A debt management plan is a program offered by credit counseling agencies which involves negotiation with your creditors to reduce interest rates and waive certain fees. You’d then make a single payment to the agency each month, and they distribute those funds to your creditors on your behalf.