Consumer credit counseling services provide assistance to clients who need instruction in how to manage their finances and to those looking for debt consolidation. Credit counseling services employ financial counselors to analyze clients' income and expenses, report counselors at Consumer Credit Counseling Services. Advisers work with clients in person, online and over the telephone.
Personal Financial Advisement
After analyzing a client's income and expenses, a credit counselor helps clients to devise a budget. She makes recommendations about where consumers can cut back and where they may be paying extensive interest charges on mounting credit card debt.
The Federal Trade Commission (FTC) reports that nonprofit consumer credit counseling services can help consumers get debt under control. Although a service may list itself as nonprofit, however, its services may not be free. The FTC reports that many consumer counseling organizations hide fees and end up costing consumers additional debt. Reputable organizations typically will send potential clients free information without asking many questions up front.
Reputable credit counseling agencies employ trained financial counselors and usually operate out of an office to which clients can go. Check with the Consumer Sentinel Network to find whether a consumer credit counseling company has any complaints.
Education
Many credit counseling services, such as Consumer Credit Counseling Services, offer community educational programs to both recruit new business and to educate consumers on how to avoid excess debt and financial problems. They teach courses on budgeting, home buying and financial literacy. A reputable credit counseling service educates clients about the pitfalls of credit and learns about the level of the clients' financial sophistication before recommending any other programs to manage debt, report counselors at the FTC. Organizations that offer money management services without an educational component should be avoided.
Debt Management
Debt management services might include using a credit counselor to intercede with creditors and try to negotiate payment plans. Many credit counselors are set up to consolidate debts and collect payments from the clients. For a fee, the credit counselors pay the creditors from the single payment they receive from their clients. The FTC advises consumers to personally call creditors to make sure they have agreed to the debt management plan developed by a credit counselor. Verify that creditors have agreed to waive late fees and accept lower payments. Consumers should be leery of a credit counseling service that makes too many promises, such as quickly repairing a credit report or guaranteeing that they can reduce debt by any significant amounts.
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