Credit Counseling

What Is Credit counseling?

Sometimes it does not seem possible to manage the problem of being financially overextended. If you're deeply in debt, cannot create a workable budget and cannot wok out a payment plan on your own with your creditors, credit counseling may help you set up a budget and debt payment plan.

Credit counseling is a process offering assistance and education to financially distressed consumers. As household and credit card debt reach all-time highs, more and more Americans are turning to credit counselors for assistance. Nearly nine million people in financial trouble have some contact with a consumer credit counseling agency each year.

Credit counseling organizations offer a range of services, including financial and budget counseling and community education, as well as debt consolidation plans, known as debt management plans, or DMPs. Nonprofit credit counseling agencies charge little, if anything, for their services.

How credit counseling works

Credit counseling organizations/agencies were first established in the 1960s to help individuals in financial difficulty gain control of their finances, repay their credit card debts and avoid bankruptcy. Typically, the work of credit counseling organizations is both present and future directed: to help debt-strapped consumers to manage their existing financial problems and to teach them better financial management skills for the future.

Most traditional credit counseling organizations either charge nothing or solicit modest contributions from clients to help defray their expenses. Credit counseling agencies also can be funded by creditors through so-called "Fair Share" contributions.

What credit counseling services can do for you

Credit counseling organizations have a number of options to offer their financially-distressed clients, depending on the client's individual circumstances, which range from simple advice and guidance on managing finances to (in extreme cases) advising that consulting a bankruptcy attorney may be the consumer's best option. In addition, credit counseling agencies have offered to put certain clients into a payment program commonly termed a "debt management plan" ("DMP").

DMPs allow consumers to pay off their unsecured debts, such as credit card balances, by making a single, consolidated monthly payment to the CCA, which then disburses those funds to the creditors of debts covered by the DMP.

In short, credit counseling services can:

• help you create a budget
• provide a variety of credit education services
• put together a debt management or debt consolidation plan.

To find out which credit counseling agencies are availble online, click here.