What To Look For In A Credit Counseling Service

Credit counseling is not for everyone, but may be for you if you are struggling with debt. Credit counselors work by negotiating a reduced payment plan with creditors. In exchange for receiving timely payments, creditors may return a small portion of the amount received to the counseling service. Only consider a counselor if you can reign in your spending and pay off your debt in less than five years.

Like the rest of the credit world, counseling services have good guys and bad guys. MSN offers several ways to identify a bad guy:

  • They ask for a high upfront fee: $10 is appropriate. $1,000 is not.

  • They lack accreditation: Make sure your counseling service belongs to the National Foundation for Credit Counseling or the Association of the Independent Consumer Credit Counseling Agencies.
  • Crazy Promises: Counselors are not magicians. They can help manage debt, not make it disappear. They cannot pull a rabbit out of a pigeon in a hat. That quarter in their hand, the one that came from behind your ear. It’s yours.


The Consumers’ Guide to Credit Counseling [MSN Money via AllFinancialMatters]
National Foundation for Credit Counseling
Association of Independent Consumer Credit Counseling Agencies
(Photo: saibotregeel)


Edit Your Comment

  1. rdm says:

    I love CCCS.net. I’ve been with them for 2 years. The fees are low and much lower than what I’d be wasting in interest otherwise.

    Note that during the first year with a CC program that you might have problems getting credit. I had to get a car loan and it was big drama (and a high interest rate). After that first year though it’s fine… except that we are now buying a house and a conventional mortgage looks at credit counseling as “chapter 13”. You can easily use another mortgage though.

  2. Landru says:

    I have used such a service – Consumer Credit Counseling Service of San Francisco. While I have really mixed feelings about them, it did work for me – I’m down from over $20k of debt when I was really underemployed, to under $5k now that I will pay off shortly. Took about five years, and I really thought I’d never pay it off.

    Basically, the way they operate is that they arrange a payment plan that you can pay, get your interest rates lowered, and they you pay them a set payment every month (I did automatic deduction from my checking account) and they pay the creditors. A service fee (in my case $20.00) is included in the monthly payment.

    A couple of things I learned:

    They get your twenty bucks a month for administering your bills, but they are funded by the credit card companies (they told me this when I signed up, after I asked). I heard the whole system was set up by the industry to avoid further government regulation.

    They say they will negotiate with the banks on interest, but they don’t really; they ask and accept whatever the companies say.

    They make their money on a large scale; once you’re enrolled, look for little or no customer service and sometimes out & out hostility.

    Early on, there were two or three months when they messed up on the payments to the credit card companies and I incurred a bunch more penalties. I was unable to get anybody to listen – and since I was in such a mess financially, I didn’t feel I could complain. It was really humiliating.

    One of the interest rates is still pretty high, and once I called seeing if I could get it reduced. The “counselor” yelled at me and said that if I even asked them to reduce it, they would demand the payment in full and if I couldn’t pay it, then it would ruin whatever improvement I’d made to my credit rating.

    So while it worked for me, it was at times very unpleasant. They bill themselves as agents for those in debt, but they are really just an front for the credit card companies, and eventually they act like it.

    I’m grateful that I was able to get through this, but I probably didn’t gain anything at the end that a bankruptcy wouldn’t have granted. While it’s nice to know I paid it off myself, I still think credit card companies are all agents of Satan and I would have no problem sticking it to them through bankruptcy.

    Sorry this was so long.

  3. Deryn says:

    Long, but totally worth it, Landru. I didn’t know that about the counselors being fronts for the CC companies.

  4. mad_oak says:

    @rdm and everyone else…

    Treating Consumer Credit Counseling like a BK is common practice…. and not just for Conventional Loans. The difference is that Conventional loans want to see you out of CCC longer than most ‘jumbo’ programs. (jumbo programs dip all the way down to $50K, so don’t think they don’t apply to you). One thing to keep in mind. If you have a BK AND CCC, you are dead to a lot of Jumbo programs and will wait quite a while for a Conventional.

  5. planetdaddy says:

    I had debt problems and I took care of them myself. I called my creditors myself, and was able to set up payment plans and one of my creditors dropped my interest rate to 6% if I was willing to let them autodraft $100 monthly on my bank account. It took a little time, but soon I was square. Once I had about six months of regular payment my credit score went back up.

  6. thrillhouse says:


    … except that we are now buying a house and a conventional mortgage looks at credit counseling as “chapter 13”.

    Bingo! Exactly right. And that “chapter 13” will haunt you , tho maybe not as long as a real chapter 13. Neither are a great idea.

    You are essentially paying someone to talk to your creditors and make your payments for you. Guess what… many of these places are just as bad at it as you are. And you’re left with little to no recourse in that event.

    Some of the scum in the credit counciling industry tell you that you can better negotiate if you are 30, 60 or 90 days past due. This is a means to gain leverage that does not always pay off. Especially if they leave you hanging.

    Worst of all, its mostly just another method of ignoring the real problem and just treating the symptom. If you don’t change your habits, you’ll once again be deeply into debt in no time.

    Oh, and if one of these groups actually do negotiate down your debt, don’t forget that forgiven debt is taxable income. Your creditors won’t forget to report that to the IRS also.

  7. AcilletaM says:

    I used a CCCS affiliate and it worked good. Yeah, you’re paying someone to administer your bills but they earned it by dealing with Discover, who didn’t want to play nicely at all and thwarted many of my efforts to work out a resolution with them, and Bank One/Chase, who screwed up my account during the switch when Chase bought Bank One and no one could find my old account and didn’t think I was paying on it.

  8. AcilletaM says:

    Oh, yeah. They charge $2/month per account handled so not horrible.

    And I think the chapter 13 thing is only really as long as you are actively in debt management.

    I also changed my habits and don’t use credit at all now.

  9. thrillhouse says:


    I also changed my habits and don’t use credit at all now.


    I found it interesting how happy people were for us when we were canceling credit cards and paying off our cars. When we told them what we were doing, some CSRs said things like, “Wow, good for you.” Even had a used car salesmen say that he wished he was doing that.

    You’ll never regret this decision.