Consumer credit counseling services help you budget expenses and reduce debt. Most credit counseling agencies also provide debt management programs. An initial consultation should be free and will entail an analysis of your income, resources, expenses, debt, and liabilities.

Your credit counselor will then help you to determine strategies for budgeting and the best options for repaying your debts. These may include budgeting and spending more carefully, offering referrals to other service agencies, declaring bankruptcy, or entering the credit counselor’s management program.  

There is usually a set-up fee for these programs, ranging from $30-$50, as well as a monthly management fee, which can be as low as $3. These programs consolidate most or all of your debt into one monthly payment. They also negotiate with your creditors to lower your interest rates and payments. Essentially, you give the agency the total amount of all of your loan and credit payments each month, and they then pay your separate creditors.

Some agencies are only out for a profit, and will take advantage of consumers seeking solutions for their financial problems. A good credit counseling agency will never charge you for your initial counseling consultation, and will not advise you to enter their debt management program unless it would actually benefit you.

In order to reduce the risk of being taken advantage of, you may consider utilizing the services of non-profit organizations. The agency should also be a member of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA), and be accredited by either the International Standards Organization (ISO) or by the Council on Accreditation (COA).

Additional Resources

-- National Foundation for Credit Counseling (NFCC):  http://www.nfcc.org

-- Association of Independent Consumer Credit Counseling Agencies (AICCCA):  http://www.aiccca.org

-- International Standards Organization (ISO):  http://www.iso.org

-- Council on Accreditation (COA):  http://www.coastandards.org