When Should You Get Credit Counseling? The Complete Guide

Credit counseling

By Lacey Langford, AFC®

When you need a helping hand learning how to budget, repay your student loans, or deal with overdue bills, credit counseling is a resource you can use.

As a Financial Counselor myself, I’ve seen firsthand the positive impact getting help can have on your financial situation.

Long story short? You might need credit counseling if you’re:

  • stuck or struggling financially
  • living paycheck-to-paycheck
  • struggling with credit card debt or another debt problem
  • missing debt payments
  • or have debt in collections

A credit counseling service can help you uncover solutions to financial problems that negatively impact your life.

You may not know you need credit counseling until you’re creeping up on a financial crisis or desperate for debt relief. By then, you need help quickly, but often people don’t know when, how, or where to get credit counseling.

Here’s what you need to know to get financial help ASAP.

In this article

What is credit counseling?

Credit counseling is when a credit counselor gives you advice on general money management, credit, and debt management. They can also provide tools and resources to help your finances.

A credit counselor is different from a bankruptcy attorney, for example. But if you're considering bankruptcy, a counselor can help you review your options and provide other information that could help connect you with the resources, people and tools you need to make such a big decision.

Depending on your financial situation, counselors can help with developing a debt repayment plan, budgeting, getting a copy of your credit report, and general credit counseling.

Credit counseling vs. credit repair

It’s essential to know the difference between credit counseling and credit repair.

Credit counseling is done through organizations that want to help you increase your financial literacy and improve your money management skill set.

Their services can include one-on-one advice that provides the education, resources, and tools you need.

In other words, they want to help you help yourself, both now and in the future.

Credit repair is about improving your credit score.

Credit repair companies review your credit report for errors and help you contact companies to fix the errors in reporting.

Credit repair cannot get negative information removed from your credit report.

Depending on the negative information like bankruptcy or late payments, that information stays on your credit report for 7-10 years.

You don’t need a credit repair company to improve your credit score. You can do it all on your own.

But sometimes you may prefer a little guidance in the process.

Why you might need credit counseling

Credit counseling is for anyone needing guidance or a game plan for money management. You don’t need to be in a financial crisis to find benefit in getting some pointers on your money.

Getting help before your financial situation becomes stressful is the perfect time to seek financial counseling. Being proactive with your money is the best way to avoid financial problems.

Credit counseling can help you solve urgent financial problems as well. They can help you create a plan to repay your debt and get to the bottom of your financial problems.

They can also help you negotiate on late payment fees and get a lower interest rate, especially if your debt continues to increase.

What credit counseling helps with

Credit counseling is tailored to meet your individual needs. Here are some of the many ways credit counseling can assist you.

  • Budgeting
  • Creating a Debt Management Plan
  • Understanding Your Credit Score
  • Consumer Credit Counseling
  • Bankruptcy Counseling Services
  • Stopping Debt Collectors
  • Financial Counseling
  • Student Loan Repayments
  • Debt Consolidation Counseling
  • Credit Card Counseling and managing credit card debt

How to choose a credit counseling agency in 4 steps

When you’re deciding where to receive counseling, you’ll want to consider a few things in your decision.

If possible, know what you’re looking for. Do you need to talk with someone about debt repayment or budgeting?

Sometimes, you may not know everything you need help with, but starting out with one or two of your pressing financial issues can help you in the selection process.

Here are four other things to consider when seeking out a financial counseling agency.

1 - Look for accreditation and certification

When you want advice about money, you should get it from a reputable organization. So look for a certified credit counselor.

There are a couple of organizations the can help you find accredited financial and credit counselors. They are the National Foundation for Credit Counseling (NFCC) and the Association for Financial Counseling & Planning Education (AFCPE).

The NFCC is a national network of nonprofit credit counseling agencies.

All of their member agencies “must obtain and maintain accreditation by the Council on Accreditation, Inc.”

They outline eight criteria agencies must meet to maintain their accreditation that includes ethical and professional standards as well as meeting government and legal requirements.

The NFCC certifies all of its counselors and member agencies are trained to handle credit and debt issues.

Additionally, member agencies must follow the NFCC’s Member Quality of Standard guidelines.

Connect with an NFCC credit counselor and agency here.

The AFCPE is a national nonprofit providing accreditation of financial counselors, coaches, and financial educators. Their organization accredits all Accredited Financial Counselors or AFC.

These financial professionals provide financial education and guidance based on your individual credit and debt situation.

The AFCPE offers a “Find a Certified Professional” where you can search for a financial counselor in your area or one that works virtually.

You can find their search tool here.

2 - Check their nonprofit status

Many times, picking a nonprofit credit counseling agency is the better way to go, since the most reputable credit counseling agencies are often nonprofits.

But be mindful, just because someone says they are a nonprofit doesn’t mean the services they provide are free or reputable. It’s wise to get referrals from places like your bank. Then check for complaints by searching your state consumer protection office.

3 - Choose an area of expertise

Next, consider what the counseling agency’s specialty is compared to the areas of personal finance you need assistance with.

Try more than one credit counselor and counseling agency if needed to find a counselor you work well with. Getting a free consultation with more than two credit counselors can help you find the best fit.

4 - Review the services they provide

When looking for a counselor for credit, look at the services they provide.

If the organization is more focused on things like debt management plans or debt consolidation, but you want to focus on saving money for example, you may want to consider other agencies.

A good counseling agency will spend time reviewing and making a plan for your entire financial situation before recommending you use a debt management plan.

It’s a red flag if an agency wants to move you directly to products or services before assessing your current financial state.

It’s also better to find a credit counseling company that can help with a broader range of services to meet your needs.

Tips for picking a credit counselor

As a financial counselor and coach myself, I recommend shopping around for credit counselors. The same way you look for a good doctor or dentist, you should research and review potential financial counselors.

Talking with someone about your financial life gets very personal. You want to look for someone that you can have a trusted professional relationship with.

If you aren’t comfortable with them in initial meetings, you will not be comfortable sharing the intimate details of your financial struggles. And to get the most value out of credit counseling, you will need to share those details.

So do the work upfront to research and interview credit counselors before you commit to working with them. It will save you headaches later and help you get the results you want.

What to expect from credit counseling

Once you’ve found the credit counselor you want to work with, it’s time to understand what happens when you go to credit counseling.

Step 1: discovery

Depending on the credit counseling agency, you can talk with a counselor in person, online or on the phone. Counseling sessions are typically 30 minutes to an hour and each counselor will have their own counseling process they’ll follow.

Typically, your first session will begin with discovery where the counselor learns more about you, your financial values and goals and your current financial situation. It’s a chance for them to get to know you better so they can form an action plan for your individual situation.

Step 2: reviewing your financial situation

Specifically, they ask questions and review your financial documentation (like bank statements and expenses). Understanding your finances better helps them give you the best advice and resources to provide you with the best outcomes from financial counseling.

Step 3: creating an action plan

Once a counselor has gotten to know you and understands the challenges you face, they craft an action plan based on your goals.

The plan covers the steps you need to take to handle the issues you’re having with debt and credit.

Watch credit counseling in action

Want to see credit and financial counseling in action? Watch couple Marcos and Tena go through their own counseling process on Credit Chronicles:

How many credit counseling sessions does it take?

How many counseling sessions you need depends on your situation and goals for counseling.

After you meet with a credit or financial counselor, they can better assess the number of counseling sessions you’ll need to resolve any problems or educational needs.

What you need for counseling

To get started, you’ll need to provide your credit counselor with some information and documentation so they can begin quickly.

Here’s what you’ll need:

  • A list of your current expenses
  • Recent credit card statement
  • Loan payment information
  • Bank statements
  • Pay statements or stubs

What does credit counseling cost?

The majority of nonprofit credit counselors are no cost or low cost. The exact cost depends on your needs, the agency you use, and the state your counselor is located in.

If there is a fee for credit counseling it’s often adjusted based on what you can afford.

Be wary of any credit counselor companies that want you to pay high upfront fees or additional add-on costs.

Bottom line

Deciding to seek out credit counseling is a personal decision. If you’re struggling financially or want to be proactive about your money, credit counseling could be the resource you need.

Just do your homework, find a reputable credit counselor and start taking the steps to get the help you need with money management.

Want to learn better ways to manage your debt? Find more information about debt management, including resources here.

About the author

Lacey Langford, AFC® is The Military Money Expert® and the founder of LaceyLangford.com, a personal finance blog specializing in the unique world of the U.S. military. Lacey's the creator and host of The Military Money Show, a podcast dedicated to helping the military community with personal finance.

She's an Accredited Financial Counselor® with over 15 years of experience in financial planning, counseling, and coaching. Her education includes an Executive Certificate in Financial Planning from Duke University and a B.S. in Finance from the University of North Carolina at Wilmington. As a U.S. Air Force Veteran, military spouse, financial coach, speaker, and writer, she changes people's lives from being fearful of money to having control and confidence with it.

Written on May 26, 2020

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