Does Credit Counseling Work?

Learn the details of credit counselingMeet So-and-So. He or she got some credit counseling and all of their financial problems went away.

They also got whiter teeth and hundreds of new Facebook friends!

That’s how a lot of stories are written about the business of debt elimination. The tales may be true, they are also just anecdotes, small pieces of a multi-thousand piece puzzle.

The debt-elimination industry can always find such happy stories, but do they really prove a larger point? In this case, that credit counseling will help financially strapped consumers.

Is that really true? Let’s find out.

Does Credit Counseling Work?

For better or worse, the National Foundation for Credit Counseling decided to find out. The NFCC commissioned a study to determine whether credit counseling is effective.

The answer turned out to be yes, but don’t think the fix was in.

This was an independent, scientifically-based study by researchers at the John Glenn School of Public Affairs at The Ohio State University. They tracked more than 6,000 consumers over an 18-month period. The findings were released in a 94-page document on April 12, 2016. Download the Final Report from the Credit Counseling Research Study.

The NFCC is the umbrella membership organization that represents nonprofit financial and credit counseling agencies nationwide. It was founded in 1951 and its members have served more than 15 million clients since 2008.

One of its initiatives is “Sharpen Your Financial Focus,” which was launched in 2013. The program enhanced the NFCC’s standard counseling model, which includes individualized counseling, financial education and debt management plans.

There had been earlier studies of credit counseling programs, but they weren’t conclusive. The vast majority lacked a non-counseled group to compare with counseled clients.

Credit Counseling Research Questions

The Ohio State study matched 6,094 Sharpen clients with 6,005 non-counseled individuals. Outcomes for the two groups were measured on a quarterly basis over the first 18 months of the program. Researchers posed six general questions:

  • What are the demographic and financial characteristics of Sharpen clients?
  • Why do Sharpen clients report seeking counseling services?
  • What financial behaviors do Sharpen clients display at the time of counseling?
  • What changes do Sharpen clients report after counseling?
  • How does the credit profile of Sharpen clients change after counseling?
  • What is the impact of the Sharpen program on client credit outcomes?

Sharpen Your Financial Focus Impact Evaluation Results

The Sharpen client base was comprised of 63% women, and the average client age was 43. Two-thirds had education beyond high school, and 42% were married. The median monthly income was $2,800, with 75% of the clients reporting they had no savings.

Changes in their employment situation was the primary reason clients sought counseling, with 63% reporting they were facing a reduction in income. Almost 30% said they faced increased expenses due mostly to medical bills. The rest had a variety of reasons, the most common being they wanted to improve poor credit scores.

Not surprisingly, clients did not have the ideal financial management habits. Only one-third kept a budget of monthly expenses. Two-thirds used credit cards, and 21% reported using five or more cards.

Almost 42% paid only the minimum due each month on their credit cards, and 75% said bill collectors had called them.

Once researchers got a reliable profile of Sharpen clients, they set out to find how those profiles changed after counseling.

Just three months after enrollment, two-thirds said they were better at managing money and had more confidence in financial matters. Three-quarters said they were paying the debts more consistently, though 30% reported they were still paying late fees.

As for actual numbers, Sharpen clients reduced their revolving debt by an average of almost $6,000. That was $3,600 more than the comparison group.

Sharpen clients reduced their total debt by almost $9,000. That was $11,300 more than the average of the comparison group, which actually saw its total debt increase in the 18 months following counseling.

“Overall, this evaluation demonstrates that clients receiving debt counseling have statistically significant improvements in debt reduction relative to the comparison group,” the study stated.

The average credit score of Sharpen clients also improved 14 points. It increased 50 points for clients in the lower quartile.

That 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.

Was all that due to credit counseling?

“While the exact cause of the recovery is difficult to isolate,” the study stated, “there is evidence to suggest that credit counseling helps clients make significant improvements in their debt situations.”

In other words, nobody can definitely say NFCC-approved programs will solve all your financial problems, much less lead to whiter teeth. But the stories you might read aren’t random or isolated cases.

After receiving credit counseling, all those So-and-So’s really do have a reason to smile.


(Roll, S. and Moulton, S.)(2016, April 12). The NFCC’s Sharpen Your Financial Focus Initiative Impact Evaluation. Retrieved from