Credit glossary
Credit counseling
Guidance from a counselor, usually at a nonprofit agency, on budgeting, debt and credit, sometimes leading to a debt management plan.
The CFPB describes credit counseling organizations, usually nonprofits, as advising on money and debts and helping with a budget, often free or at low cost, though counselors may charge for some services. Some offer debt management plans or workshops. Before filing for bankruptcy, the FTC says you must get credit counseling from a government-approved organization within six months beforehand.
The FTC's warning signs are worth knowing by heart: an agency that promises to fix everything, charges before helping, charges for basic information, or pushes a debt management plan before reviewing your finances. Ask how counselors are paid, get any fees quoted in writing, and confirm your creditors have accepted a plan before you send payments through it.
Guides that go deeper
- Debt management plans and your credit score: what actually movesA debt management plan doesn't add a negative mark by itself, but closing your cards does change your utilization. How it works, with the math and the tradeoffs.
- Rebuilding credit after debt settlement: what's left and what to fixAfter a debt settlement, your report shows the late payments, the charge-offs and a settled status. How long each lasts, the tax bill, and how to rebuild.
Sources
- What is credit counseling?, Consumer Financial Protection Bureau
- How To Get Out of Debt, Federal Trade Commission
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.