What is Credit Counseling and How Do I Know if I Need It?

By | Leave a Comment


From time to time, we all experience financial problems. Everyone forgets to pay a bill or overspends on their credit cards on occasion. Most of the time, we can fix these little mistakes ourselves and move on with our lives.

But what if money problems become truly overwhelming? If you feel that you’re out of control of your finances and don’t know where to turn, it may be time to consider credit counseling.

Not sure what credit counseling is? Take a look at the details below to decide if this option is right for you.

What is credit counseling?

Credit counseling is basically a financial education program that will help you figure out how to straighten out the mistakes you’ve made in the past and use money more responsibly in the future. If you sign on to credit counseling, you’ll be assigned a qualified, professional consultant who will meet with you on a regular basis to assess and monitor your finances and put you on the track to debt freedom.

In some cases, credit counselors set clients up with what’s known as a debt management program (DMP). In this scenario, you would send one lump sum of cash to your credit counselor every month, and the agency will pay your debts on your behalf. In many cases, credit counselors are able to negotiate reduced interest rates with your lenders, so the DMP can be a definite win-win if you’re in financial trouble.

How do I know if credit counseling is right for me?

It can be hard to say if your money situation is so serious that you need a credit counselor, but you should think about contacting a credit counseling agency if any combination of these characteristics sounds familiar:

  • You can’t get out of debt, no matter how hard you try
  • You avoid bills because they cause you so much stress
  • You keep taking out loans and using your cards, even though you know you shouldn’t
  • You have so many debts that you can’t keep track of them
  • Your credit score is very low
  • Your financial problems are starting to seriously interfere with your day-to-day life

Where should I go to find a good credit counselor?

Credit counseling is a good option for people in serious financial trouble, but it’s important that you find a reputable organization to work with. Be sure to consult the National Foundation for Credit Counseling (NFCC) to find a good credit counselor in your area – there are a lot of scam artists out there, but if you go through the NFCC, you’ll be in good hands.

About Lindsay Meredith

Lindsay is a high school teacher and personal finance blogger. She lives, works, and plays in the Washington, D.C. area.

Compare banks for mortgage, auto, savings and CD rates. Browse bank rates. Search locally or nationally for the best finance rates.
Search locally or nationally
Compare banks for mortgage, auto, savings and CD rates.