Credit counseling: how it can help you

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Credit counseling agencies can offer free financial advice, regardless of your financial situation. If you’ve recently lost your job and struggling to budget or want to explore your debt repayment options, credit counseling can help.

Nonprofit credit counseling agencies offer a variety of services, including general personal finance advice, homeownership advice, and more. Some services are free.

Here’s a detailed look at what’s on offer, as well as how to choose an agency and get started.

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Services available at credit counseling agencies

The five main services offered by credit counseling agencies are:

  • General budgeting: A free first session, usually an hour, provides insight into your financial life, including income, expenses, and financial goals. At the end of this session, you and the counselor may decide that you may benefit from additional counseling.

  • Debt management plan: A counselor makes a plan to consolidate your consumer debt and lower the interest rate, setting a monthly payment to pay off the debt over three to five years.

  • Bankruptcy advice: The two financial education sessions that complete the bankruptcy process: one before filing and one before your debts are paid.

  • Student loan advice: Repayment options are discussed and an advisor can facilitate conversations with your loan issuers.

  • Housing advice: Whether you are struggling to pay your rent or are a first-time home buyer, there are a variety of consultation options to help you better understand and manage the cost of housing.

While credit counseling agencies typically offer many, if not all, of these services, they are primarily known for their debt management plans. Debt management plans are a form of debt relief it’s less drastic than bankruptcy or debt settlement, which are a huge blow to credit scores.

In addition, many agencies offer courses and educational resources online, often for free.

What to look for in a credit counseling agency

Accreditation and certification: Making sure the agency you work with is accredited and certified is a good way to verify that it is a reputable agency. Beware of any for-profit company claiming to be a credit counseling agency.

Access: When choosing a credit counseling agency, consider how you prefer to receive service: over the phone, in person, or online. While many agencies are accredited in 50 states, most only offer in-person counseling in certain locations.

Cost: The price of services can vary widely depending on the agency, state and individual financial needs. Before committing to a service, check how much you will pay monthly so that you fully understand the overall cost.

Know that not-for-profit credit counseling is different from for-profit organizations credit repair companies, which offer services that you can often do yourself.

Credit counseling services are also different from debt settlement, which is marketed as a quick fix, but it’s not a good option for most people.

To start

Take a few minutes to gather your financial details before calling a credit counseling agency. The initial session will cover everything within your budget, from the mortgage to movie tickets, so the more details you have on hand, the better.

Compare the prices. You can try the initial free session at multiple agencies to compare. You’ll likely have an ongoing relationship with whoever you choose, so you’ll want to make sure you can afford the fees and feel comfortable working with their agents.

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