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Feeling out of control with your credit cards and other forms of debt? You might feel as if you need a little extra help to get things in order.
Here’s the first thing you should know: You’re not alone. Many people aren’t sure where to turn when facing unruly amounts of debt or trouble managing their credit cards. To make matters even more confusing, there’s no shortage of scams that you can get trapped by. The good news? There is legit help out there.
Working with the right credit counseling agency can help you get your situation under control, but there are things you should be aware of first. Read on to learn more about what credit counseling is and things you should consider before getting help.
- What is credit counseling?
- Is credit counseling right for you?
- What should you expect from a credit counseling session?
- How to choose the right credit counselor for you
- What is a debt management plan?
- How can you get the most out of credit counseling services?
What is credit counseling?
If you feel like you need some additional support to help manage your debt and organize your finances, credit counseling could be a good option for you.
A credit counselor will work with you to help you improve your individual financial situation. Part of that may involve offering tools and resources to help you gain control over your money.
Credit counseling can help consumers navigate a wide variety of situations. According to the National Foundation for Credit Counseling, agencies can provide services such as credit and debt counseling, student loan debt counseling, housing and mortgage counseling, and more.
Is credit counseling right for you?
One of the biggest misconceptions about credit counseling is that you must be in dire straits to benefit from it. That’s simply not true. Credit counseling can be a good resource for anyone who’d like assistance with their credit and financial plans.
Consider getting in touch with a credit counselor if you’re having trouble making payments on your accounts. Unfortunately, many people wait until debt collectors are at their door.
But being proactive can do a world of good for your finances. So whether you’re a credit novice looking for financial tips on how to manage your credit or you’re feeling buried under the weight of credit card debt, opting for a free credit counseling session could be useful.
What should you expect from a credit counseling session?
After you choose a credit counseling organization, the organization will pair you with a credit counselor to get started.
During your session, you’ll receive feedback on how to improve your personal situation. A credit counseling session may include …
- Free budgeting help (beware of organizations — even those with “nonprofit” status — that charge for educational materials and workshops)
- A free review of your credit report(s)
- Next steps on how to improve your financial situation
- Referrals to other tools and resources
Depending on your situation, a credit counselor may suggest a debt management plan, or DMP, which can help you get out of debt faster, typically by lowering your interest rates and setting up a payment schedule. This is typically a last resort, so beware of credit counselors who push this as the first or only option.
Once you have a plan in place, your credit counselor may follow up with you to see how the plan is going. If you need additional assistance, you may be able to schedule another follow-up session.
How to choose the right credit counselor for you
Many companies claim they can help you get out of debt. But there are a slew of scams out there, so it’s crucial to look for a certified credit counselor with a discerning eye.
Here are some things to look for.
- Make sure the credit counseling organization is accredited by the National Foundation for Credit Counseling.
- Check with the Better Business Bureau and make sure the organization is in good standing.
- Ultimately, try to find a counselor you feel comfortable with.
Keep in mind that working with a nonprofit credit counseling organization is not the same as working with a debt-settlement firm.
To review the difference between a debt settlement company and credit counselor, see this chart by the Consumer Financial Protection Bureau.
Remember that many initial credit counseling sessions are free and only charge a fee if a debt management plan is an appropriate next step.
What is a debt management plan?
Under a debt management plan or debt management program, the credit counseling agency works with you and your creditors on a financial plan. You deposit money with the credit counseling organization each month, and the organization uses your deposits to pay your creditors on schedule.
But it’s important to note that a debt management plan isn’t necessarily the same thing as credit counseling — and it’s not the right fit for everyone. Also, unlike many credit counseling sessions, there may be a fee for a DMP.
The fees will vary depending on the agency, but there’s typically a set-up fee and a monthly fee. For example, GreenPath, a credit counseling agency, currently offers a debt management plan with a set-up cost of up to $50, with a monthly payment of $75. You may also be eligible for a fee waiver if the cost is too much of a burden for you.
How can you get the most out of credit counseling services?
If you want to get the most out of credit counseling, it pays to do a little work ahead of time, like gathering all of your financial information. This will help ensure your credit counselor has all the information needed to give you personalized advice for your situation.
On top of that, timing is key. You don’t want to feel rushed or anxious, so set a time that works for you and won’t interfere with other priorities like work and school.
Whether you simply have a few questions or would like extensive help managing your financial situation, a credit counselor can help.
Working with a credit counselor could help you access financial tools and resources to stay in good standing with your credit. Just be sure you’re working with an established nonprofit organization that has your best interests at heart.
If a credit counseling service isn’t right for you, here are a couple of other options to help you sort through your debt and get on track toward your financial goals.
- Debt settlement: Debt settlement services, also known as debt relief or debt adjustment services, offer to contact your creditors on your behalf and pay down your debt for a negotiated settlement. But be careful: These companies may charge expensive fees for their services.
- Balance transfer: If you’re struggling with credit card debt, you could consider a credit card with an introductory 0% APR balance transfer offer. This option gives you some time to pay down your debt without paying interest on it. But heads up: If you haven’t paid your balance in full when the intro period ends, you’ll start accruing interest on that balance at the card’s regular APR. You’ll also want to avoid adding on to the debt you’re paying off by making new purchases with the card.
Your credit card debt relief options
Everyone’s financial situation looks a little different now because of COVID-19. And if you’re working to manage a heavier credit card debt load right now, you’re certainly not alone.
Seeking credit counseling is a step in the right direction — so congrats on taking that important step. If you’re looking for more resources to help ease your financial burden, check out our list of roundups below.
Whether you’re looking for information on government relief measures, debt relief measures announced by credit card issuers or other issuers, we’ve got you covered.
Relief measures from credit card issuers, auto, mortgage and student loan lenders
- Coronavirus credit card payment and debt relief
- Coronavirus auto loan payment and debt relief
- Coronavirus mortgage debt relief programs for homeowners
- Coronavirus student loan payment and debt relief
Government relief measures
General advice for paying down debt
Looking for general tips on how to budget or navigate your credit card debt? Check out some of our advice articles below.