What Is Credit Counseling… And Why Do I Need It?

Knowing when it’s time to ask for an expert opinion to get out of debt.

Credit counseling can save you from drowning in debt
So you know you’re struggling with credit card debt and that you need to find a solution that will help you reduce the debt quickly without damaging your credit too badly. Easy.

Just type “credit card debt help” or “credit card debt solutions” into your favorite search engine and find what you need, right?

Sadly, no.

Pop Quiz

Which debt solution listed below can solve credit card debt problems effectively?

a) Debt consolidation program

b) Debt management program

c) Debt settlement program

d) All of the above

Reveal Answer

Which solution you use depends on the specifics of your unique financial situation.

d) All of the above

Return to question

So debt solutions come in a variety of different breeds. Which breed will play the best with the rest of your financial outlook is largely dependent on your situation. So what works for one person, may mean failure for another and vice versa.

This is where a certified credit counselor comes in to provide a little expert perspective – as well as peace of mind that you’re making the right choice to move forward.

A credit counselor shows you the way forwardWhat does a credit counselor really do?

The whole point of consulting with a credit counselor is to find the debt solution that will work best for your situation. Instead of trying to research all of your options on your own (which often involves navigating always easy-to-read government websites) and trying to choose the one that matches your situation, you just go to an expert.

Just like a doctor can tell you what’s wrong with you and what you need to take to cure a physical ailment, credit counselors can do the same thing for any financial pains you’re having.

Fact: Credit counseling agencies are nonprofit. So consultations are free and minimal fees are charged for other services.

Assessing 3 key areas of your financial outlook

This is what a credit counselor looks at during the initial consultation to see what kind of financial help you need…

Looks at your budget to see things like:

  1. How much income you have coming in
  2. How much total debt you have to pay off
  3. How many other obligations are taking up money that could be used to reduce your debt

Looks at your credit to see:

  1. If your debts are current or past-due
  2. How far past-due your debts are if they haven’t been paid in a while
  3. What your credit score is to see if you can qualify for DIY consolidation

Looks at your financial portfolio to see:

  1. If you have assets you can liquidate to pay off debt
  2. If you have assets that need to be protected from filing bankruptcy

Those three things together allow a credit counselor to make a determination on exactly what is your best option for getting out of debt. They weigh your finances against the debt relief options available to help you find the right way forward.

So when do I need credit counseling?

Simple: Whenever you don’t know for sure which debt solution you should use.

If you’re not sure which direction to take or you just want a second opinion about the debt solution that you decided to use, go to a credit counselor. Since the consultations are free, you don’t have anything to lose by having a short chat with a professional.

What to look out for to avoid credit counseling scams

  • First, make sure that you’re working with an accredited credit counseling agency. The company should be a nonprofit and should have a listing with the BBB. Always check the BBB website and also consider looking on independent third-party review websites to make sure the company offers good service.
  • Make sure the counselor is certified. Credit counselors are supposed to get trained and take a course to prove they have the know-how to help clients. If your counselor isn’t certified, you’re not getting the opinion of a certified expert! Even if you’re calling an accredited agency, make sure the person you’re speaking with is certified.
  • Be wary of fees! FTC regulations means these agencies cannot charge upfront fees for consultations and any program fees are capped based your income and how much you can afford to pay. If a company is charging exorbitant fees, it’s probably a scam and you should file a complaint with the CFPB .