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Credit Counseling vs Credit Repair

In the world of credit counseling, there are many terms thrown around that can confuse the average consumer. Two of those terms are credit counseling and credit repair. Credit counseling is an educational program for consumers who have trouble managing their debt. Credit repair is about taking a bad credit situation and making changes to improve your credit rating.

Each of these services is available nationwide. Credit counseling can be done in one visit with a non-profit counseling service. Credit repair takes time and requires the consumer to be mindful and purposeful about paying off late fees, late payments, and older debts before creating new ones, as well as being willing to challenge negative entries on their credit report.

Let’s examine the guts of what these two services provide, how to engage the services of a credit counselor, and why credit counseling and credit repair may be effective at solving particular types of financial problems.

Credit Counseling – The Nuts and Bolts

Non-profit credit counseling agencies can help you with general financial guidance, how to buy your first home, reaffirming on debts, and so much more. They work with you to determine the best way to create a solid, stable financial position for your family. Most credit counselors charge a one-time fee, but many are available for free if you qualify as low-income.

So, what can you expect during credit counseling? That will completely depend on what your personal financial situation is. In general, you will be asked to bring copies of all your bills (yes, paper copies – it’s easier), your tax returns for the past few years, bank statements, paycheck stubs from the past six months, and information on any additional income (from freelance work or a part-time side job). Some counselors will ask you to email or fax these documents in advance, but bring your own copies so everyone can look at the documents at the same time without the burden of slow wi-fi on digital devices.

CC Advising does not require paper documents and allows you to simply use estimates for all of the information submitted during the course. That being said, the more accurate your estimates, the more accurate the financial advice you receive from the counselor will be.

Here are some things you might encounter during a credit counseling session:

General budgeting: This is generally a low-cost meeting that takes from 30 minutes to an hour. You will work with the counselor to take a look at an overview of your financial situation: primary income, secondary income, expenses, investments, insurance, and long-term financial goals.

Student loan counseling: With the burden of student loans spiraling out of control, many credit counselors are now offering help with repayment options. A counselor is also extremely helpful if you need to negotiate with your student loan creditors.

Housing counseling: Credit counselors can offer you general advice on renting versus buying, what it takes to buy your first home, and what parts of your credit history will affect your ability to obtain financing for a home.

Debt management plan: If a debt management plan makes more sense, you will work with the counselor to consolidate your debts and decrease your interest rates. This results in one monthly payment used to eliminate debt in about three to five years (this is the standard timeline, not a fixed timeline).

Bankruptcy counseling: In recent years, the bankruptcy laws have changed to include required financial education sessions on either end of the bankruptcy process. You must complete certified credit counseling before you file for bankruptcy and just before your debts are discharged by the court.

Most credit counselors are more likely to offer you a debt management plan as they get paid to work with your creditors in resolving your debt. But, that’s not all they offer. Some credit counseling agencies offer instructive programs and other debt management resources online, usually at no cost. Once you know your financial position inside and out, it may be time to talk about credit repair.

Credit Repair – The Steps of Credit Restoration

Credit repair is largely based on your credit report. There are of course multiple websites where you can check your credit report for free. There are also credit monitoring agencies and identity theft protection plans that all monitor your credit report for fraudulent transactions or new accounts being opened in your name.

Credit repair counselors get paid to help you review, challenge, and update your credit reports by removing false, fraudulent, or negative issues on your credit report. But you can also do this very same thing on your own. There are certain steps you can take that don’t require the help of a certified credit counselor.

Get your credit reports: the three major credit reporting agencies – Equifax, TransUnion, and Experian – are required by law to release your credit report to you. Get copies of all three from

Review the reports for errors: it is entirely possible that one or more of your credit reports has old accounts, discharged debts, fraudulent charges, or other errors on them. You need to highlight those errors in preparing to challenge them.

Dispute the error: When you find an error, make hard copies highlighting the accounts. Bring together any information that backs up your dispute, like bank statements, and make copies to send in because credit bureaus won’t act without proof. Write a letter to the credit reporting agency that shows the error. Explain the mistake and send a copy of the highlighted report along with any financial documentation you have collected. While you could do a dispute online, it is better legally to send the package via certified mail and keep copies of everything for yourself. It’s impossible for the credit agency to deny they received your documentation with certified mail. Then, they have 30 days to respond.

Re-evaluate your Budget: Once you have a corrected credit report, you need to start keeping closer track of your accounts, bill payments, and take care of any unresolved debt. Your focus needs to be on building better credit, paying off debt, and creating a savings plan.

Pay on Time: Moving forward, you must pay all your bills on time or early while paying down credit card debt. Credit card debt is one of the most costly types of debt to carry and paying those cards off as soon as possible should be one of your primary goals after cleaning up your credit.

Avoid New Accounts: Do NOT apply for any new credit while you are cleaning up the errors on your credit report(s). This includes new credit cards, bank lines of credit, mortgages, refinancing, new cars, or other large purchases. Your score will only go up if you are paying down debt. When you create new debt, you are lowering your credit score.

These are the same steps that credit repair companies will take, but you will pay them for their services. It may seem easier to just let someone else handle the situation, but because it can take years to repair your credit, that means you will be paying that company for that entire time (if they charge a monthly fee) or you will pay a larger fee for them to initiate and conduct communication with the credit reporting agencies and any creditors they need to contact.

If you aren’t confident in your skills to handle credit repair alone, it is always wiser to invest in the skills and experience of credit repair company. Make sure they are established, and read unbiased reviews from past clients to make sure you are going with a reputable company.

Engaging a Credit Counselor

When you make the decision to engage a credit counselor, make certain that you are researching all of your options. Most credit counselors will help with credit counseling inexpensively, as long as they are a non-profit entity. If your financial situation is not dire, a simple, one-time counseling session may be all you need to complete. But, if you have multiple financial issues that need to be addressed, make certain you find a counselor who can work with you long-term.

Where to Start

It is always best to try to find a local credit counseling service, although there are numerous online services that can do just as good a job helping you through credit counseling digitally. The online services are generally better and cheaper if you need to take the required credit counseling to file bankruptcy. However, if you don’t want to trust some invisible entity that does everything online, find a local credit counselor you can meet with in person.

How Do I Know he/she is Certified?

Certified credit counselors educate clients on their root causes of their debt. They examine your income and spending habits to help you avoid maxing out credit cards, falling behind in mortgage payments, and ignoring your savings accounts. Information regarding counselor certifications should be present in their terms and conditions.

How much should I be Willing to Pay?

The Federal Trade Commission and the NFCC always recommend that you engage the services of valid non-profit credit counseling associations. Non-profit agencies usually give counseling for free or at a lower rate. The NFCC has approved 57 non-profit agencies across the country, but there are no for-profit companies accredited by the NFCC.

There is a difference between credit counseling with a focus on debt management and pre-bankruptcy credit counseling, which is required to file bankruptcy. Pre-bankruptcy credit counseling does not have to be NFCC managed or approved, you would simply use an agency approved by the UST. You can find a list of providers at:

If you have reached the stage of pre-bankruptcy credit counseling, you don’t really have any options other than bankruptcy to resolve debt. That type of counseling is more or less to verify that all other options are exhausted, and to put you on the path for financial success moving forward.

The credit counselors at for-profit agencies are pushed to persuade people to buy company products and services. Their bonus structures are often based on how many people they sell fee-originating programs to. These programs are often not necessary, but for-profit counselors will make money by selling them.

Does it work?

According to, America’s debt relief organization, “data from the National Foundation for Credit Counseling showed that member agencies counseled 1.2 million consumers in 2017. The agencies reported that nearly 70% of those enrolled in debt management plans had either paid off or were paying off their debt in a 4- to 5-year window.”

The NFCC also offers a credit counseling curriculum called “Sharpen Your Financial Focus” to help people learn to manage their money. “Ohio State University surveyed participants in the program and found 68% say it helped them manage their money better and 73% said they are paying their debt more consistently. Over a year and half, the average participant’s credit score improved 50 points and revolving debt dropped $8,000.”

When credit counseling works, consumers are put in control of their finances and may not have to file for bankruptcy.

Bankruptcy is an Option

Many people don’t want to file for bankruptcy because of the stigma attached to it. We look at it as simply another tool in the financial toolbox that can help you get out of debt and back on the road to financial recovery.

When you file for bankruptcy, you can temporarily stop creditors from harassing you. The bankruptcy law is there to help you reorganize your finances so that you are in a better position long-term. Bankruptcy law also doesn’t always let creditors write, call or sue you once you file bankruptcy. Bankruptcy may stop foreclosure on your house, repossession of your car, or even garnishment of wages, but it doesn’t erase all debt. Certain debts like student loans, tax debt, and child support aren’t allowed in a bankruptcy filing.

When you decide to do counseling instead of bankruptcy, your credit counselor will advise you to bring your mortgage and utility payments up to date first. Then, make sure your car payments are current – you can’t go to work without transportation, and you can’t pay off debt if you aren’t working.

Your counselor may also advise you to start selling any unnecessary stuff taking up space in your house – like old DVDs or clothing that is sellable. You’d be amazed how many people actually have clothing and shoes in their closets with the tags still on them! There are multiple websites where you can sell your items at no cost to you, or you can have a gigantic garage sale. Use the proceeds from these sales to either keep food in the pantry or pay down smaller debts.

Part of good credit counseling is teaching the consumer how to live on a tight budget. Scale back on all entertainment, trips, or other costly endeavors. Live on the minimum: mortgage/rent, car payments, utilities, student loans, food, and child support. Then, find a part-time job to help bring all your payments current and start paying down debt.

Finally, it is crucial that you maintain contact with your credit counselor to keep your plan in motion and to have that person hold you accountable for your spending. When we don’t have to answer to anyone, we are less likely to follow through on the plan.


Credit counseling is a great way to get your budget in line, reorganize your debt, and face the truth of your financial situation. Credit repair helps you increase your credit score while erasing erroneous or fraudulent items on your credit reports. Either option is a great way to bring stability to your overall financial picture.



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