When their debts become too much to manage, many people find themselves turning to a credit counseling service for help. Credit counseling services will provide advice on managing household debt. They can help consumers to develop a budget if they do not already have one. Many will also provide consumers with free education materials, workshops or seminars. A counseling service will review a consumer’s entire financial situation with them and help them personalize a plan that can help save money and begin paying off their debts. A typical session will last about an hour but generally the individual may also elect to have follow-up sessions.


An important part of many counseling services is enrolling in a debt management plan: paying off accumulated debts by making a single payment to the counseling service, which in turn makes payments to creditors on the consumer’s behalf . Consumers should only sign a plan after spending time with a counselor reviewing their debt management options. A successful debt management plan will require an individual to make monthly payments and the entire plan could take up to four years to complete.

Credit Counseling Scams


There are scams in the credit counseling industry. The Federal Trade Commission and many state Attorney General offices have sued companies who referred to themselves as “non-profit” credit counseling agencies. Assess the reputation of a company prior to signing a debt management plan. Some companies have been found to misrepresent their business practices to regulators and many have lied about their nonprofit status. Several of these companies would charge high fees and urge the consumers to make “voluntary” payments that only deepened their debt. Other companies established debt management plans but then did not forward payments to creditors.

Finding a Reputable Credit Counseling Service or Debt Management Service

While some credit counseling services operate strictly over the telephone or through a Website, if possible, it is always best to visit with a credit counselor in person. There are many credit-counseling programs offered through universities, credit unions, county extension offices, military bases and housing authorities. However, it is important to understand that just because an organization is listed as “non-profit,” does not mean that they do not charge a fee for their services. “Non-profit” also does not necessarily mean that these services are legitimate, so it is important to be smart about the service that is selected. Check with the local Better Business Bureau or state consumer protection agency. These offices will often be able to alert consumers as to whether there have been serious problems with those particular credit-counseling services.