What Is Credit Counseling?

• A credit counseling service is an organization (usually a nonprofit) that is committed to helping consumers better manage their finances. The organization educates and informs clients on a variety of financial topics, including paying off debts aggressively, debt consolidation, debt management plans, avoiding bankruptcy, navigating foreclosure issues, managing credit accounts, saving for retirement and bettering a personal credit score. A credit counselor works with each individual, upon request, to provide him with the financial assistance he needs. In some cases, a credit counseling organization may charge a fee to consumers for certain services.
  
  

Credit Counseling Foundations

• The National Foundation of Credit Counselors is one of the most popular credit counseling services available. The American Consumer Credit Counseling service is another nonprofit agency that provides advice to consumers. Another organization is Money Management International, which is one of the largest credit counseling organizations in the United States. Research thoroughly each counseling service you are considering and choose one that best fits your needs.
  
  

How to Start the Process

• If you are ready to seek the assistance of a credit counselor, it helps to know the process in advance. The first step is to compile a list of all your debts, expenses and income sources. Gather the most recent billing statements and examine terms, such as interest rate and balances on debt accounts. Prepare a list of questions you have about the credit counseling service as well. The next step is to call a credit counseling service to schedule an appointment either in person, over the phone or over the Internet in some cases. A credit counselor contacts you to discuss your issue and asks for specifics about your income and expenses. The counselor will provide you with suggestions for improving your financial status.
  
  

Concerns

• Not all credit counseling services are legitimate. Some commercial companies may advertise themselves as legitimate credit counselors, but only want to sign you up for a costly debt-management plan or claim to have the ability to instantly boost your credit score. Before you start a counseling relationship, search for the company on the Better Business Bureau website. Also, keep in mind that credit counseling isn't guaranteed to work for every situation. For example, the dropout rate for debt management plans is about 45 percent. The result of a credit counseling relationship depends largely on your own commitment to resolving the financial issue.