What is a Credit Counselor?
- Definition: A trained expert providing financial advice on debt management, budgeting, housing, and bankruptcy.
- Common Features: Nonprofit agencies often provide free or low-cost services.
- Costs: Fees for services like debt management plans (DMPs) are typically capped at $75/month; enrollment fees are around the same.
How Credit Counseling Works
- Initial Session: Free budgeting and financial review.
- Services Offered: DMPs, housing counseling, and bankruptcy support.
- Payment Plan: Under DMPs, you consolidate debt into one payment to the agency, which negotiates with creditors.
Pros and Cons of Credit Counseling
Pros
- Access to financial experts for free/low cost.
- DMPs available even with bad credit.
- Can include bankruptcy and housing counseling.
- Possible negotiation for lower payments, fees, and interest rates.
Cons
- Monthly fees may apply.
- Lenders may not agree to a DMP.
- Credit score may drop temporarily due to account closures.
- Long-term debt resolution (3 - 5 years).
How to Choose a Credit Counselor
- Certifications: Look for NFCC or FCAA-accredited companies.
- Special Services: Choose agencies offering tailored services for unique financial needs (e.g., veterans, housing).
- Fees: Ensure transparency in fee structure and availability of waivers for hardships.
- Reputation: Check reviews and for any legal actions.
Top Credit Counseling Services
- Cambridge Credit Counseling Corp.
- Features: No debt minimum, nationwide availability, certified counselors.
- Fees: $40 average enrollment, $30 monthly (capped at $50).
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Best For: Comprehensive services with no minimum debt requirement.
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InCharge Debt Solutions
- Features: Military-focused resources, bankruptcy and housing counseling.
- Fees: $75 enrollment, $33/month.
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Best For: Veterans and military families.
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Money Management International
- Features: Low fees, no debt minimum, virtual services nationwide.
- Fees: $33 average enrollment, $25/month.
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Best For: Low-cost, widely available services.
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Consolidated Credit Solutions
- Features: Specializes in housing counseling, financial literacy for employers.
- Fees: $40 monthly average, $1,000 debt minimum.
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Best For: Housing-related financial advice.
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Debt Management Credit Counseling Corp. (DMCC)
- Features: Payday loan assistance, well-trained counselors.
- Fees: Varies by state, $5,000 debt minimum for DMPs.
- Best For: Unique services like payday loan help.
Alternatives to Credit Counseling
- Debt Consolidation Loans: Combine high-interest debts into one lower-rate loan.
- Debt Settlement: Negotiate to pay less than owed (riskier option).
- Bankruptcy: Last resort; consult a certified counselor before proceeding.
FAQ
- Does Credit Counseling Hurt Credit?
- Sessions don't harm credit, but actions like DMP enrollment might temporarily lower scores.
- Cost of Credit Counseling?
- Fees vary but often range from $0 - $75/month. Initial consultations are typically free.
- Is Credit Counseling a Scam?
- Reputable agencies are accredited and often listed by the Department of Justice.
Pro Tip: Always verify an agency's credentials and review its fee transparency before enrolling in any service.
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