- Companies providing debt management programs (Credit Counseling Agencies)
- Non Profit Debt Consolidation
- Debt Management Program (DMP)
What is credit counseling?
Credit counseling is a service which includes a thorough review of your financial situation, personalized advise on managing your money and debt, help on developing a budget, and provision of educational resources and courses.
Who provides it?
Credit counseling is typically provided for free or for an affordable fee from non-profit credit counseling agencies. Educational material should be offered for free. Beware of "non-profit" abuse and scams, which may translate in high fees, mandatory fees disguised as "voluntary contributions," and pressure to enroll in a Debt Management Programs (DMP) regardless of whether it is necessary or advisable for your case.
Other organizations such as some housing counseling agencies, credit unions, or military bases might also offer credit counseling.
How does it work?
A counseling session can be provided face-to-face in a local office, over the internet, or by phone. The first session might last about an hour for an initial assessment (including on whether counseling is necessary and advised in the first place) and be followed by subsequent sessions.
With the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, credit counseling has become a mandatory requirement when filing for Bankruptcy in the United States. An individual must obtain counseling from an approved non-profit credit counseling agency before being able to petition for bankruptcy under Chapter 11 of the Bankruptcy Code.
The Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) of 2009, under 15 U.S. Code § 1637 (11)(B) iv, mandates that consumer credit card account statements with an outstanding balance or with finance charges must show a toll-free telephone number for information on how to access credit counseling and debt management services.
Effects on your credit
Credit counseling per se is not reported on your credit report and will not affect your credit score in any way. Only if you subsequently enroll in a DMP you will have to consider what is reported to the credit bureaus, which in any case amounts to a neutral notation which does not affect your credit score.