What is Credit Counseling?

Credit Counseling may be a good option for some people but you need to be aware of some of the pros and cons of credit counseling programs. Reputable companies will advise you on managing your money, will help with budgeting and will give you free educational materials. Many companies operate nonprofit or fee-based financial counseling programs. Creditors may be willing to accept reduced payments if you are working with a reputable program to create a debt repayment plan.

However, credit counseling organizations have faced scrutiny because there is no guarantee that the services provided are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high hidden fees, and refuse to send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances. There are also credit counseling companies who are supported by credit card companies.

Look out for companies who:

• Try to enroll you in a debt management plan (DMP) without spending time reviewing your financial situation.
• Offer to enroll you in a DMP without teaching you budgeting and money management skills.
• Demand that you make payments into a DMP before your creditors have accepted you into the program.

Read our Credit Counseling FAQ’s for more guidance on this option.