Can I Trust a Credit Counseling Agency? Here’s What You Need to Know. – NFCC

Editor’s note: This post was originally published in April 2019.

NFCC often receives questions from readers about their money challenges. We answer common questions in our Ask an Expert series to help readers find the information they need.

Q: I need to get out of debt, but I don’t know if I can trust credit counseling agencies. Who can help me?

I remember hearing that most credit counseling agencies are affiliated with the credit card companies and that they do not have the consumer’s best interest at heart. Is this true?

Due to health problems, I have not worked for a long time and I am in a huge amount of debt. I’m at the point where I have to file bankruptcy, or see if the credit card companies can charge me less. I haven’t missed any payments and I want to pay all of this back, but I’m just treading water at this point. How do I figure out what to do? Is there some kind of free (and reputable) agency I can contact?

Answer: Dear Reader,

“Cahoots” is such a great word, but it’s not necessarily accurate. To say that credit counseling agencies sometimes partner with creditors would be more accurate.

Nonprofit credit counseling organizations exist for one basic purpose: to help individuals in financial difficulty deal with debt and manage their money more effectively. This may sound like a public relations statement, but it’s the truth!

Here is more information on how these agencies work with creditors.

Why do credit counseling agencies work with creditors?

Credit counseling organizations and creditors sometimes work together to help consumers overcome their financial challenges. Here are some ways they do it:

• Avoiding missed payments: Creditors tend to like credit counseling agencies because they help cardholders pay off their debt. If you go through credit counseling, you can get help building a budget, get debt management support, and find ways to stay current on your debt payments. Because of this, some creditors contribute funds to credit counseling agencies so that they can continue to do their work. Credit counseling agencies also receive funding from grants and fundraising.
• Debt management plans: Some creditors will offer you special terms if you sign up to a debt management plan (DMP). For example, your creditor may lower your interest rates or lower your monthly payment if you include your account in a DMP.

How to find a reputable credit counseling agency?

If you want to find the best help, contact one of them National Foundation for Credit Counselingmember agencies of (NFCC). The NFCC has been around since 1951 and its member agencies offer free and low-cost advice to their clients.

As a customer, you can simply talk to an advisor without having to sign up for any service. There is no obligation to take their advice.

You can make an appointment with an NFCC member agency online, or by calling 800-388-2227. Most sessions are conducted over the phone, but face-to-face sessions are also available.

What happens in a credit counseling session?

During a one-hour session with an NFCC-certified credit counselor, you’ll tell your counselor what your goals are and share details about your situation. This includes reviewing your monthly income and expenses.

The advisor will then provide you with personalized advice. For example, they may suggest enrolling in a DMP to pay off your debt, or they may guide you through other options, such as debt consolidation OR bankruptcy.

How can credit counseling help you?

Your credit counselor is a financial professional who will work to fully understand your finances. Their job is not to promote a specific solution; is to help you find the right fit for you your financial goals and needs.

For example, given what you shared, the counselor may want to talk to you about your income situation. They can help you find ways to make money and/or connect you with other agencies that can help cover your needs. Additionally, the advisor will review your debt and recommend specific ways to manage each account.

Based on what you shared, it sounds like you could benefit from speaking with one of these professionals as soon as possible.

Sincerely,
Erica Sandberg

Erica Sandberg is a consumer finance expert and journalist. She is a former NFCC-certified credit counselor who has written for US News & World Report, TIME, Newsweek and more. Sandberg is also the author of Waiting for Money: The Essential Financial Plan for Young and Growing Families.