Credit Counseling Explained

Credit Counseling is a service provided by many companies in order to help consumers get control of and manage their debt. They may work with you alone to help establish a plan for structured payment of your debts, or may work with your creditors to reduce the interest or principal owed on your debts. Some credit counseling services may also offer credit consolidation, which is where they will manage all of your debts with a single payment that you send to them every month, and they distribute that to your creditors.

Which counseling service is right for you?

Much depends on your credit and income situation. If you are in a position where you are making adequate income to meet your credit obligations as well as monthly living expenses, you will probably be offered the simplest form of credit counseling, and that is helping you to establish a budget and money-management techniques to live by.

If you have lost your job recently or have other hardships that are preventing you from making your credit card or debt payments, the counseling service may offer to speak to your creditors on your behalf and convince them to lower your payments, interest or even defer payment on your obligations until you get back on your feet again.

How Do Credit Counseling Services Get Paid?

Usually through a flat fee that is set at the time you sign up with them. Keep in mind, that how much the fee is will be almost entirely dependent upon how much of their time and effort they feel they will require to straighten out your credit situation and the depth of involvement that you wish them to have in bringing your debt under control. Offering a budget counseling plan, for example, is going to be less expensive than if you choose to have the service consolidate all of your debts and manage that for you. If you are interested in credit counseling and want to pursue applying for help, take a look at the credit counseling requirements to get yourself prepared.