What is Credit Counseling?
Credit counseling helps you learn to budget and manage your money while you pay back your debts.
What programs and services are available for Credit Counseling?
- Credit counseling helps you pay back debts through budgeting and managing money.
- Debt management plans help you combine your debts and arrange for one lower monthly payment over a longer period of time. You can find this service through many financial institutions.
- Debt consolidation plans help by lowering the cost of credit by combining debt through a second mortgage or a home equity line of credit. These loans ask you to put up your home as collateral.
- Education classes teach you budgeting, and how to save and manage your money.
Be careful: There are also “debt negotiation” programs. They may tell you they can pay off your credit card for less than you owe, from 10% to 50% of the balance owed. These programs can be very risky.
What does Credit Counseling cost?
There is usually a setup fee for a debt management or a debt consolidation plan. The cost should be between $50 to $75. Credit counseling agencies also charge a monthly fee. This should be no more than $25 to $40. Good credit counseling agencies usually offer free educational materials and workshops.
How do I qualify for Credit Counseling services?
If you have trouble keeping a budget or paying down your debt, you may want to think about getting help from a non-profit credit counseling agency
In a situation of first-time bankruptcy, you will be required by federal law to receive credit counseling from an approved credit counseling agency. You must receive an “individual or group briefing” from a non-profit credit counseling agency within 180 days before filing for bankruptcy.
Where do I apply for Credit Counseling Services?
Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an agency that offers in-person counseling. Non-profit agencies that offer credit counseling include:
- military bases
- credit unions
- housing authorities
- branches of the U.S. Cooperative Extension Service
Your financial institution, local consumer protection agency, friends, and family may also be good sources of information and referrals.
Where can I find out more?
- Federal Trade Commission (FTC)
Information on credit counseling, debt management plans, and debt negotiation programs as well as credit counseling scams
- Commonwealth of Virginia State Corporation Commission (SCC)
Lists of companies licensed as credit counseling agencies in Virginia
- Better Business Bureau (BBB)
Information on complaints filed about credit counseling agencies and information on how to select a credit counseling agency with a good reputation
- Credit Counseling and Debtor Information
Includes a list of agencies approved by the U.S. Department of Justice for bankruptcy credit counseling.