Millions of Americans living paycheck to paycheck are familiar with that sinking feeling of being unable to get out of debt and keep up with bills. If you’re one of these people, a nonprofit credit counselor may be able to toss you the financial lifeline you need.
Credit counselors provide a range of tools and resources to help you get a handle on your personal finances and manage debt. A reputable credit counselor should be certified and trained in the fields of debt management, consumer credit, managing money and budgeting.
In this article, you’ll learn the ins and out of credit counseling, including the services offered by counselors, what to expect before a counseling session, how to prepare, and questions you should be prepared to ask.
What Is Consumer Credit Counseling?
Credit counseling is a tool consumers use to improve their money-management skills, reach their financial goals, and either escape or avoid the pitfalls of debt and financial distress, which could ultimately lead to bankruptcy.
The goal of a good credit counselor should be to help you develop a personalized plan for tackling your individual challenges, be it consumer, student loan or mortgage debt, or simply living beyond your means. A good credit counseling plan may include:
- A budget to help you track your income and expenses and adjust them accordingly
- Information on free educational workshops and resources to help with money management
- A debt-management plan to pay down your debts and improve your credit rating
How Does Credit Counseling Work?
- Information: You’ll provide basic contact and demographic information, including your name, phone number and other contact information, and state where you live.
- Financial Situation: You’ll share information about your income and assets.
- Budget: You’ll provide a detailed list of your expenses. You’ll receive an analysis of your expenses and recommendations for how to reduce them.
- Debt: Your credit report will be pulled for a detailed list of your current credit card debts and other loans.
- Solution: You’ll receive a personalized debt relief solution.
If the debt management plan is the best solution for your situation, you will be provided with:
- A consolidated monthly debt payment amount
- The time frame it will take to pay off your debt
- The amount of money you will save in interest
Beyond helping you to create a Debt Management Plan (if that is the appropriate solution for your situation), credit counselors can also provide advice on a variety of other topics, including bankruptcy, help with tax debt, student loan debt and the pros and cons of using home equity to pay off your debt.
Regardless if you are online or contacting one of our counselors by phone, finding the best solution to your debt problem can be done from the privacy of your home and on your time schedule.
Questions to Ask a Credit Counselor
While it’s easy to assume that you’ll be on the receiving end of most questions during a credit-counseling session, it’s important to come equipped with questions of your own to ask and know what to look for in the way of answers. Here are some of the basic questions anyone meeting with a credit counselor should be prepared to ask (and what to expect to hear in return):
- What services do you offer? You want a credit counselor who is able to provide a range of potential strategies to tackle your financial challenges, and won’t try to box you into a one-size-fits-all approach. Basic services any reputable credit counselor should be able to provide you include setting up and maintaining a budget and education on managing your spending habits and debt levels.
- What are your credentials? Make sure you are working with a certified credit counselor who belongs to an accredited organization. Two of the largest independent certifiers are the National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA). Look for those initials – NFCC or FCAA – when searching for a credit counseling agency.
- Are there any fees for the services? Basic counseling help such as budgeting should be free if you are working with a nonprofit counseling agency, but there may be costs associated with more complex services like arranging a Debt Management Plan or student loan counseling. Find out what costs are associated with any service that you are offered and how the fees are assessed; some may be taken out of monthly payments you make for a DMP, for instance, while others are paid up front.
- Will there be a formal written contract? Make certain that any verbal promises made to you during the session are put into writing and that you read and understand everything in a contract before signing it.
Choosing a reputable credit counselor through a nonprofit agency like InCharge Debt Solutions can help you manage your money more efficiently and avoid financial crisis. A good counselor will help you create an affordable budget and offer suggestions on how to trim expenses so you can meet your debt obligations every month.
How Should I Prepare for My Credit Counseling Session?
To make the session as valuable as possible and to limit the amount of time required, it’s a good idea to do a little homework beforehand and come with as much information as possible to help your counselor understand your financial situation and needs. Here’s a list of information and/or documents to bring with you:
- A list of your monthly expenses. These should include fixed expenses like rent or mortgage and car payments; variable expenses such as food and clothing; and periodic bills that come due annually or semi-annually like property taxes.
- A rundown of your monthly income, including wages, child support payments and Social Security.
- Most recent credit card statement and credit report, if available.
You’ll also want to spend some time before your session thinking about your financial goals and what you hope to gain from the process of working with a counselor, be it reducing your debt burden or saving for a home or car.
Will I Need to Provide My Social Security Number?
When you work with a certified credit counselor, it’s important that they have all your financial information at hand in order to understand your complete credit situation and offer a personalized solution. Your credit counselor will request your social security number (or you will be asked to provide it online), but be assured that all personal information is confidential and carefully protected. By providing your social security number, your credit counselor will be able to pull your credit report and review your total debt situation. You will receive a copy of this report.
Once your credit counselor has a full picture of your financial situation and goals, the two of you will be able to map out a plan and the best tools at your disposal to execute it. Whether your needs are as simple as basic household budgeting or as complex as debt settlement or even bankruptcy, a credit counseling session with InCharge Debt Solutions can mark an important first step on the road to a brighter financial future.
N.A. (2018, February 2) “What is Credit Counseling” Retrieved from https://www.consumerfinance.gov/ask-cfpb/what-is-credit-counseling-en-1451/