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Credit Counseling Agency – On the Path to Debt Relief

Credit Counseling Agency – On the Path to Debt Relief

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Betsalel Cohen
UpdatedMay 8, 2024
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    2 min read

Credit Counseling Agency – Preliminary Consultation

It is easy to run up credit card debt during times of financial pressure. Car repair, dental work, medical bills, replacing the roof, or a myriad of other emergencies demands your immediate attention.

Sure, it is much better to have savings and emergency funds; however, according to the Federal Reserve Report on the Economic Well-Being of U.S. Households in 2015 (published May 2016):

Nearly half of adults are ill-prepared for a financial disruption and would struggle to cover emergency expenses should they arise;

If you are struggling with your debt and want to protect your credit, then a credit counseling agency can help organize your financial house. A reputable agency will provide a free consultation that reviews your budget, credit, and analyzes your financial capabilities to service your debt. If they feel that you are a good candidate, then the credit counseling agency will recommend a Debt Management Program (DMP).

No matter which solution you choose, a thorough financial examination will aid you in choosing the best debt relief program for your particular situation.

Credit Counseling Agency - Debt Management Plan Recommendation

Credit Counseling Agencies generally work with a Debt Management Program (DMP), which consolidates your credit card bills into one monthly payment. The DMP negotiates lower rates with the credit card companies and set up a payoff schedule that lasts about five years.

If you have good-to-excellent credit, then a personal debt consolidation loan might be the better option. It is important to compare interest rates and fees (monthly for the DMP and upfront fees for the personal loan).

A Credit Counseling Agency generally provides free (or perhaps a limited fee) first consultation and educational services. However, since they generally are looking to enroll consumers in their DMP, it is important to compare your various debt relief options.

Credit Counseling - Financial Review

Credit Counseling Agency – Find A Reputable Company

Credit Counseling agencies are a good source of help for many people looking to understand their financial situation and get out of credit card debt. Unless your financial situation is strong, there are no easy fixes. Use your free consultation to understand your debt relief options.

Many credit counseling agencies boast that they are non-profit. Although that may sound like a big advantage, it is very important to check and make sure that the agency is a reputable firm.

Here are a few ways to check:

  1. Accredited: There are two major accreditation, the Financial Counseling Association of America (FCAA), formerly AICCC, and the National Foundation for Credit Counseling (NFCC).
  2. Dept. of Justice: Check out the Dept. of Justice Website for accredited agencies
  3. BBB: Review the company's ratings and reviews. Also, check with their scam tracker.
  4. Fees: Make that you are not paying an upfront fee. The DMP has a setup fee (about $40) and a monthly fee of about $25-$75.
  5. Counselor accreditation: Credit counseling agencies hire counselors. Ask them regarding their accreditation.
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Struggling with debt?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Each state has its rate of delinquency and share of debts in collections. For example, in Hawaii credit card delinquency rate was 2%, and the median credit card debt was $472.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.