Is Credit Counseling Good or Bad

small wooden block with the words credit counseling written in blue sitting in front of a computer keyboard

There are many different opinions from financial experts and consumers regarding the use of credit counseling agencies in order to help get out of debt. Some will tell you it’s the best thing you can do for yourself when you are in uncontrolled debt, while others will warn you to stay as far away from a credit counseling agency as possible.

How can you make the decision whether or not to work with an agency or not?


If you are considering signing with a credit counseling agency to help manage your debt, you need to research. Don’t join the first company you find without comparing their services to other companies or checking their reputation. Here are a few questions you should ask of any credit counseling agency you are considering working with:

  • Is the agency a nonprofit organization?
  • How is the monthly payment determined?
  • How much money will each creditor receive each month, and on what date will they receive payment?
  • What will your interest rates on your existing accounts be once enrolled in the credit counseling agency’s program?
  • How much money does the agency receive each month out of your monthly payment, and what is it used for?
  • What happens if you decide you want to cancel?

These are important questions you should ask of any credit counseling agency before making a decision. If your monthly payment is going to be $300 and $100 of that goes to the agency for their services- are you really saving money by working with this company? Couldn’t you send that $100 to one of your creditors on your own and help reduce the amount you owe? If the amount is minimal, say $20 on a $300 monthly payment, it may be worth working with the Agency if they are able to reduce your interest rates on your accounts so that more of the payments are going towards the debt rather than new finance charges.

Possible Self Negotiations

What most people don’t consider is the fact that they can call each of their creditors on their own and ask to work out a new payment arrangement. If you explain you are having difficulty and are considering going to a credit counseling program or bankruptcy, there is a possibility that they might work with you and lower the interest rate that you’re paying, the minimum monthly payment, or both! In fact, you may be able to negotiate better terms than a credit counseling agency since creditors basically have a process that they follow when working with the agencies and working with an individual may afford a little more flexibility and work out in your favor.


Better Business Bureau

When you’ve just about decided that you are ready to work with a specific credit counseling agency, your final step before enrolling should be to check out the company’s reputation with the Better Business Bureau. This is where you can find out about complaints made about the company by consumers like yourself and decide whether or not you think they are an honest company worthy of your business.

After Enrolling with a Credit Counseling Agency

Your work doesn’t stop after you’ve enrolled with a credit counseling agency. You will want to review your account statements each and every month to make sure that they are receiving payments from your agency on your behalf. There have been horror stories of individuals who enroll in credit counseling agencies, send their payments in month after month, and the agency never actually submits the payments to your creditors, or they do so late all the time which results in late fees and eventual termination from the program!

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