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How to Choose a Credit Counseling Agency

In times of financial instability, it is difficult to determine which route you should take when it comes to personal financial situations. Each one of us has to deal with financial issues every day – whether it’s paying our monthly bills, deciding whether to pay for entertainment (sports events, movies, etc.), or even deciding whether or not paying for a cup of designer coffee is a good idea.

When it becomes apparent that your financial situation is unstable at best, you need to consider taking steps to change your situation. Some people think debt consolidation or opening new lines of credit are the solution. In some cases, that may be true. But most often, if your financial situation is dire, you need to ask for help.

Credit counseling agencies are wonderful places to find help. A reputable credit counseling agency will offer you services for free, fully review your financial situation without judgment, offer ways to build a budget for your current needs, or offer help in the form of debt management plans. But, there are certain characteristics to look for when choosing your credit counseling agency.


If you do a quick google search for credit counseling agencies, you will get millions of pages of results. There will be advertisements, lists of the “best” credit counseling agencies, and general information on credit counseling agencies. One of the results is the list of credit counseling agencies approved by the US Department of Justice. This website offers a list of approved credit counseling agencies by judicial district, state, U.S. territory, or commonwealth. It is the most comprehensive list of reputable agencies in the country.

To be included in this list, the agency must meet several criteria:

  • Non-profit
  • Offer free budget counseling for low-income individuals who apply
  • Offer free financial education for low-income individuals who apply
  • Offer pre-bankruptcy credit counseling courses

Being non-profit is a primary concern for two reasons. One, there is no hidden agenda and the agency’s counselors offer all education for free if you are under 150% of the poverty guidelines and apply. Two, their agents are not pressured to “up sell” clients into debt management programs that make the agency money. With this in mind, a reputable non-profit will only be focused on helping you find the best way to manage your financial situation. Its counselors will also be accredited.


Making sure all of its counselors receive accreditation is another sign that you have come to the right place. Many agencies don’t even require their counselors to be accredited because their goal is sales. Gaining accreditation is not at all an easy endeavor.

All credit counselors seeking accreditation must take a course in credit counseling. One respected agency is a certification by the National Association of Certified Credit Counselors (NACCC). Those who take the course learn about a holistic approach to credit counseling including financial knowledge and successful counseling techniques to teach clients about improving their financial status. They learn how to counsel the financially stressed, implement financial strategies to improve the client’s situation, and educate clients about financial strategies and proper budgeting.

While it is essential to have a good certified credit counselor, a certified financial counselor receives additional training to deal with clients suffering from poor credit, financial instability, and other problems with money.

The Certified Financial Counselor (CFC) teaches clients how to improve their financial well-being of the long-term after repairing their short-term issues. The CFC is trained in

  • Counseling and coaching approaches
  • The mindset of money management
  • Credit scores and finding the right bank
  • Debt management plans (when appropriate)
  • Handling student loans
  • Mortgages and refinancing
  • Retirement (evaluating what you have and planning to improve your retirement goals)
  • Handling clients and their money ethically

While either type of counselor is a good choice, a CFC might have more ideas for helping you or more options for repairing credit and improving your overall financial health. But, either counselor should always begin with a full review of your finances to determine what options are best for you.

Full Review of your Finances

Prior to your appointment, find out what paperwork your counselor wants you to bring or provide at your counseling appointment. If all they ask for is your salary information and credit card bills, they are not looking at the full picture. The only thing they can offer with that limited information is a debt management plan – a plan where they make money.

A full review of your finances will include the following:

Statements of Your Debts

Bring all information about every one of your debts – credit card statements, personal loans, hospital/medical bills, mortgage, car loans, and student loans.

Records of Expenses

Bring records of your monthly expenses – utilities, food, routine medical expenses, pet costs, insurance, cable, internet access, and transportation. It would also be helpful to bring information about money you spend on vacations, entertainment, eating out, or other things you don’t consider as monthly expenses. These can help your counselor in determining how to set up a budget.

Statements of Your Income and Assets

Bring proof of your household income (all members contributing to the household should offer this information and be present at the counseling session) – tax returns, recent pay stubs, bank account statements, investment account statements, and information about any property you own (free and clear).

Looking through Debt

When looking through your debt, your counselor should be thorough, noting principal versus interest debt, how many payments you have on installment loans, what you owe for student loans (which cannot be rolled into debt management or bankruptcy), payment arrangements for medical services rendered, and current status of your mortgage (if you have one).

Did you know that if you pay off an installment loan early, you may get some money back? Oftentimes banks will do what is called “pre-loading” or “front-loading” of interest on a loan, so during the first two to three years, you are only paying for interest and very little on the principal (original amount) of the loan. A good counselor will take note of how much interest you have paid and why it may be a good idea financially to pay off an installment loan first. If you pay that off first, and get a refund on interest, you can put that money toward another debt.

Student loans can be a long-term blight on your financial situation. If you have a reasonable amount of student loan debt, but it is spread over different loans – so you owe $25,000, but it’s in three separate amounts – consolidation would make sense. Most of the student loan servicers will offer consolidation for either a shorter or longer term and can set your monthly payment according to your salary.

If you extensive medical bills, and you’ve already made arrangements for a payment plan, there is probably nothing else a counselor can do for that debt. Most medical facilities and companies don’t charge interest for payment plans, so consolidating medical bills into a loan will just cost you more.

If you have a mortgage, and it is current, your counselor should take a look at what your interest rate is compared to current rates, and determine whether or not refinancing would be a good option to help you save money. Granted, refinancing has costs involved, but paying for an appraisal (around $300) and closing costs (around $2000) when it will save you tens of thousands of dollars over the long-term just makes good financial sense.

Looking through your Expenses

Expenses and debt are not the same thing. Monthly expenses include things like utilities, groceries, routine medical expenses, pet costs, insurance, cable, internet access, streaming services, and transportation (the costs of public transportation, long-term parking, or upkeep of vehicles).

A wise credit counselor will use this information to determine where you can cut spending and put that money toward your debt. For example, can you make an effort to use less water, gas, and electricity? Some utility companies offer a budget plan, so your cost is the same every month. This helps with budgeting, but it can result in your last payment of the year being high (this is when they balance your account based on services used versus the amount you paid over the year).

If you have routine medical expenses, and you don’t have good insurance, there are pharmaceutical companies that offer rebate programs for expensive medications and there are certain places you can get routine antibiotics and other medications for free.

A credit counselor should also point out ways to save on groceries, pet care, and digital services. There are package deals, coupons, and rewards programs that offer you money back based on your purchases. These programs are offered at gas stations, grocery stores, restaurants, hardware stores, and other retail outlets. They are worth taking advantage of.

When it comes to transportation, a credit counselor can help you find low-cost options for public transportation. Most cities offer discounts based on age, disability, or economic hardship. Maybe this is something you qualify for that you never knew about. If you own a car and have to pay for long-term parking, a counselor can investigate other places you could park for less or recommend other ideas. To help reduce costs of vehicle upkeep, you can look for coupons and discounts, rewards programs, or even learn how to do routine maintenance yourself. It’s quite simple to change air filters, rotate tires, and do oil changes at home.

Reviewing income and assets

Your credit counselor will need to review the income and assets of everyone contributing to the household – that include children or other relatives who earn money for household expenses. By reviewing your tax returns, a credit counselor can determine whether or not you are filing in the most efficient manner, if you are missing certain exemptions or deductions, and if you should consider using a tax service to help get more out of your tax return.

Reviewing recent pay stubs and bank account statements helps your counselor get a picture of the money coming in versus the money going out. By looking at individual transactions, the counselor can identify patterns of expenditures that are not in your best interest. The counselor can also point out areas where maybe one member of the family is spending on something they shouldn’t.

When your counselor reviews your investment account statements and information about any property you own (free and clear), he or she is looking for cash or property that could be liquidated to pay off debt. There are rules surrounding the sale of investment income and real property in terms of early withdrawal penalties and taxes, but a certified counselor can explain those to you.

Once your full financial picture has been laid out, your credit counselor can help you design a budget that helps you live within your means while paying off debt.

Budgeting Help

It has become commonplace for high school students to take courses in money management and how to handle debt. However, that doesn’t mean that everyone is adept at handling money. A certified credit counselor has the tools to help you set up a budget that helps you maintain your payments while paying off debt.

First, the counselor will point out places where you are wasting money or could cut back on spending. For instance, if your bank statements indicate that you eat out at least 10 times each month at a cost of $50, well that’s $500 that could be put toward debt. Or, maybe your family loves a local sports team and season tickets for four costs $3000 a year. It may be worth it to skip it for a year and pay off a credit card instead.

Credit counselors can also direct you to financial gurus who offer free services online, like Dave Ramsey. His articles on budgeting are not only about living within your means, but also about saving for emergencies and paying off debt. He also offers a program called “Baby Steps” for living well:

Baby Step 1: Save $1,000 for Your Starter Emergency Fund – this will cover those unexpected life events you can’t plan for.

Baby Step 2: Pay Off All Debt (Except the House) Using the Debt Snowball – list all of your debts except for your mortgage. Put them in order by balance from smallest to largest. Start by paying off the smallest. Then, use that money to add to what you need to pay off the next largest debt, and so on.

Baby Step 3: Save 3–6 Months of Expenses in a Fully Funded Emergency Fund – take the money you were throwing at your debt and build an emergency fund that covers 3–6 months of your expenses.

Baby Step 4: Invest 15% of Your Household Income in Retirement – whether it’s a 401(K) or IRA, get serious about retirement—no matter your age.

Baby Step 5: Save for Your Children’s College Fund – start a 529 college savings plan or ESA (Education Savings Account).

Baby Step 6: Pay Off Your Home Early – the extra money you put toward your mortgage could save you tens (or even hundreds) of thousands in interest.

Baby Step 7: Build Wealth and Give – give to charity and leave a sizeable inheritance for your kids and their kids.

A fully accredited credit counselor will not only give you good advice based on their training, but also all the tools available out there to help you save money and pay off debt.


When you are ready to choose a credit counselor, remember to look for a non-profit agency, accredited counselors, and counselors who go beyond a quick review. Your counselor needs to be invested in you, your family, and your future.



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