Does Credit Counseling Work?

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Money woes plague countless millions of Americans, stressing marriages and giving rise to feelings of hopelessness. For many mired in debt, credit counseling offers a lifeline to solvency and better money-management skills.

Nonprofit credit counselors teach skills critical to budgeting and avoiding crippling debt. With their help, you will be able to assess your finances and learn debt-relief options.  If you can remediate your problems, credit counselors can help you reach your goals and guide you in creating a budget that will help avoid debt in the future.

Through credit counseling, you will not only find a solution to your debt problems, you’ll gain insight into personal financial techniques that can serve you throughout your life.

Sharpen Your Financial Focus Impact Evaluation Results

Credit counseling sounds like a good idea, but does it really work? An Ohio State University paper released in 2016 offered conclusive evidence that it does.

The study, commissioned by the National Foundation for Credit Counseling (NFCC), tracked more than 12,000 people, half of whom received counseling and half who didn’t, over 18 months. The results supported the benefit of counseling.

The counseled subjects were part of a NFCC program called “Sharpen Your Financial Focus,” an initiative launched to enhance the organization’s credit-counseling model.

Not surprisingly, Sharpen clients were lacking financial management skills. Only a third kept a budget of monthly expenses. Two-thirds used credit cards, and 21% reported using five or more cards.

Their poor financial habits led to problems. Nearly 42% only paid the minimum balance due on their cards each month and 75% said they received calls from bill collectors.

After three months in the program, the results conclusively showed where credit counseling helped.

Results of the study:

  • Two-thirds of the counseled clients said they were better at managing money and more financially confident.
  • Three-quarters said they were paying the debts more consistently, though 30% reported they were still paying late fees.
  • group reduced their revolving debt by an average of almost $6,000. That was $3,600 more than the average for the group that wasn’t counseled. Sharpen clients reduced their total debt by almost $9,000. That was $11,300 more than the average of the comparison group, which saw its total debt increase in the 18 months following counseling.
  • The average credit score of Sharpen clients also improved 14 points. It increased 50 points for clients in the lower quartile.

The improved scores meant they were eligible for lower interest rates on mortgages, refinancing and other loans. They also had more bargaining power when they applied for personal loans from banks or other institutions. “Overall, this evaluation demonstrates that clients receiving debt counseling have statistically significant improvements in debt reduction relative to the comparison group,” the study stated.

Is Credit Counseling Right for You?

There is a major misconception that seeking credit counseling is seen as a last ditch move for those on the brink of a financial meltdown.

In fact, credit counseling can be valuable to just about anyone who finds borrowing and budgeting intimidating or confusing. Someone new to consumer credit might visit a credit counselor for advice on how to budget to avoid overspending. The counselor can analyze the person’s income and spending patterns and offer suggestions for avoiding credit-damaging missteps.

Most people wait until their bills are overwhelming and credit card debt piled high before they visit a credit counselor. Counseling at that point is remedial. The counselor will evaluate the person’s overall debt and recommend a plan for eliminating it. In the most extreme cases, that might be a bankruptcy filing, but more often it’s creating a debt management plan.

In some instances, a credit counselor will recommend a self-directed plan that involves using plastic cards less, limiting spending to essentials and paying off balances at the end of every month. In other cases, the recommendation is a supervised debt management plan, one that requires you to close your credit accounts and make monthly payments to a debt manager who will negotiate with your creditors to create an affordable payment plan.

Debt management actively pays down debt and often takes three to five years to complete. Unlike debt settlement, a risky strategy used to lower debts by negotiating with creditors to pay less than what is owed, debt management is a payment plan. Debt settlement can damage a person’s credit score but debt management usually results in improving your credit score as the debt is paid off.

How Does Credit Counseling Work?

Now that we know that credit counseling works, the next question is, how does it work?

One answer is that assessing your financial situation with a licensed credit counselor helps you diagnose root causes and assess relief options. Signing up for a nonprofit debt management program helps simplify bill-paying through consolidation.

Nonprofit credit counselors also provide financial literacy education on budgeting, raising your credit score, reducing your expenses and making smart financial decisions. These benefits work together to help people reduce their credit card balances and improve their financial health.

Credit counselors usually charge little or nothing to review and assess a person’s finances. If they recommend a debt management plan, their agency will charge fees to create and administer it.

On average, a consumer credit counseling session takes about 30 minutes. Whether you pursue online credit counseling or telephone counseling, here is what will happen during your session:

  1. Information: You’ll provide basic contact and demographic information.
  2. Financial Situation: You’ll share information about your income and assets.
  3. Budget: You’ll provide a detailed list of expenses and receive an analysis and recommendations for how to reduce them.
  4. Debt: You’ll pull your credit report for a detailed list of your current credit card debts and other loans.
  5. Solution: You’ll receive a personalized debt relief solution. Solutions vary. For some, it is a self-managed spending program. Others will be advised to enter a supervised debt-management program that consolidates and pays down debts. Debt counseling agencies often offer to supervise management plans. Debt settlement is another option, one that entails a debt adviser negotiating a debt reduction and repayment plan. And in the most extreme cases, bankruptcy might be the best way to clear debt.

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


  1. Roll, S. and Moulton, S. (2016, April 12). The NFCC’s Sharpen Your Financial Focus Initiative Impact Evaluation. Retrieved from
  2. Musinski, B. (2019, December 6) How Does Credit Counseling Work? Retrieved from: