Credit Counselors

Who are Credit Counselors?

Anyone can claim to be a financial expert, but trained counselors offer certified experience and accreditation (usually through the Council on Accreditation for Children and Family Services) to substantiate their expertise. These individuals teach consumers to manage spending and control debt, frequently through nonprofit organizations offering free or low-cost services. An initial counseling session may last up to an hour or more as the counselor reviews the client’s financial situation and offers down-to-earth advice about how to better regulate spending and decrease debt.

Services Offered

Unlike financial planners who frequently focus on building wealth and other long-term financial services, credit counselors are concerned with the everyday facts of spending and saving. Services that credit counseling companies offer vary but typically include educational workshops, credit management counseling, and debt management plans for extreme cases.

All counseling services begin with a detailed, confidential budget review to determine where each client can save money and better their financial health. This may include analyzing a credit report, particularly to help correct errors or improve the resulting credit score, or running debt-to-income risk evaluations. Knowing an individual’s detailed history helps the counselor offer personalized advice about their specific money management needs.

Education

An educated consumer is one who can manage their own money and make sound financial decisions. Counselors offer a range of educational services, either through free literature, workshops, or individual consultation. Popular topics include:

• How to track spending and set a personal budget.
• Saving for emergencies and how much should be put away just in case.
• Saving for large purchases such as a house, college education, or car.
• Fraud and identity protection tips.
• Tips for saving money through day-to-day personal habits.
• Consumer rights when dealing with creditors.
• How to wisely use credit for daily living.
• Tips for saving on taxes.
• How to create and meet long-term financial goals.

Credit Management

Individuals who need immediate assistance may prefer the credit management services that counselors can provide. While education is a cornerstone to wise money management, some consumers need more help overcoming their immediate obstacles. Credit counselors can help clients analyze different credit cards and choose which accounts to cancel, create a budget for repaying credit card debt as soon as possible, and offer other advice for managing existing lines of credit more wisely.

Debt Management Plans

Debt management plans are a fee-based service that credit counseling agencies may offer. This is an extreme measure that some clients may require, particularly if they are on the verge of bankruptcy, repossession, or foreclosure.

A debt management plan usually involves negotiating with creditors (banks, credit card companies, and other loan sources) for waived fees, lower payments, and lower interest rates. Counselors will do this for the client and then set up a payment structure. The client pays the counseling company one lump sum fee each month, which the company divides into payments for each account. During the repayment period, individuals may be restricted from opening new accounts and their finances will be periodically monitored as the counselor works with them to restructure their spending habits.

While a debt management plan is a useful tool for individuals who find themselves in dire financial straits, it is important to note that it should be a last resort. Credit counselors that immediately advise such a plan or push for one over the client’s protests should be considered suspect; their fees may be contingent on clients signing up for programs with higher fees than basic counseling services.

Do I Need Counseling?

Direct counseling is not necessary for everyone. There are many resources available through books, websites, and other outlets that offer sound credit and debt management advice; but individuals who prefer a human perspective may feel more comfortable seeking the assistance of a licensed professional. At the same time, counselors deal primarily with individuals who already have some money management concerns: if you manage your money well but are interested in long-term investments, the services of a financial planner would be more useful.

Finding Credit Counselors

A quick search of the local phone book will turn up several suitable counseling agencies, but some individuals may feel embarrassed by their financial situation and would prefer more anonymous contact (though the counselor will require accurate personal information to be of assistance). Many credit counseling agencies offer services over the phone or online, and much of their educational materials can be found on websites. Before choosing a counselor, be sure to verify that they are licensed to provide services in your state and that they will protect your confidentiality.

Online resources include:

• Credit Counselors
• American Consumer Credit Counseling
• National Foundation for Credit Counseling
• Consumer Credit Counseling Services

For sound money management advice including savings tips, visit:

• Motley Fool
• LoveToKnow Save

The services of credit counselors can be priceless for individuals who need a helping hand unraveling their credit woes and learning how to effectively manage their money. While working with a counselor may not solve every financial problem, it is a good step toward sound savings.