Best Credit Counseling Services

A credit counselor is certified or trained to provide consumers with expert financial advice and education. Depending on their training and certifications, they can provide guidance on topics such as debt management, housing, bankruptcy and budgeting. Your credit counselor should be able to share their credentials and experience with you before you agree to proceed.

Credit counselors can hold certification through organizations such as the NACCC or NFCC.

In most cases, credit counselors work for nonprofit credit counseling agencies. As nonprofit entities, they can often provide services at a lower cost than a for-profit company. For example, you can receive preliminary credit counseling services free of charge, such as a financial review, budgeting advice and a debt management strategy.

Fees are often limited by the state where you reside. You may not pay any fees if you have a financial hardship or need. Fees max out at $79 a month if you enroll in a service like a DMP. You may also need to pay an enrollment fee, which often falls in the same range.

» MORE: How to get out of debt

Credit counseling helps individuals with their finances, whether they need to create a budget or are on the brink of bankruptcy. Credit counseling companies offer varying services, but typically you can expect to find money management advice, debt handling, budgeting and bankruptcy counseling. Some companies offer specialized counseling for those facing preforeclosure.

At many of the companies we reviewed, budget counseling services are free. However, companies may charge an initial setup fee and flat monthly fee for a DMP. Under a DMP, the credit counseling agency works with you and your creditors to develop a plan. The goal is to become debt-free. Some individuals will qualify for reduced or waived fees based on their income.

Individuals stay on a DMP until their enrolled debt is resolved. You can contribute more money each month toward your debt to make the process go faster, or you can cancel your DMP at any time.

» MORE: Is debt management a good idea?

When choosing a credit counseling service, it’s imperative to verify that the company and its agents are reputable and hold the appropriate credentials. You can usually use the company’s website to find information about its affiliations and what certifications its employees hold. It may also be helpful to read online reviews to get a feel for what other people think about it.

Search for any recent legal actions or complaints against the company for deceptive or unfair practices using databases provided by the Consumer Financial Protection Bureau (CFPB), the Better Business Bureau (BBB), the Federal Trade Commission (FTC) and your state attorney general.

Here are some key factors to consider:

• Company certifications and accreditation: Look for companies that are accredited by reputable nonprofit organizations like the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Counselors should also be certified in consumer credit, money and debt management and budgeting.
• Services offered: If you have unique financial needs that you need help with, look for credit counseling companies that excel in those areas. Additionally, if you are military-connected, a company that works closely with military members and veterans will have a better idea of your unique situation and might also give you a specialized discount. Be wary of organizations that push a DMP as your only option before they spend significant time analyzing your financial situation.
• Fees: Reputable credit counseling agencies often provide free or low-cost services. Be sure to get a clear understanding of any fees involved, and ask if the agency offers fee waivers or reductions based on financial hardship.
• Transparency: The company should be upfront about what they will and will not be able to do for your situation. All fees and the estimated time frame should be laid out clearly. Avoid companies that promise quick results.

The counselor should talk about your finances in an easy-to-understand way, provide several options for you to consider (including costs and savings) and give you time to review before making a decision.

A credit counselor should never coerce you to sign up for services. If this happens, report the behavior to the FTC or CFPB.

Nonprofit vs. for-profit credit counselors

Both nonprofit and for-profit companies can assist you in your financial journey.

• Nonprofit credit counseling agencies are typically funded through voluntary contributions from creditors and may also receive grants from government agencies or private foundations.
• For-profit credit counseling agencies operate as profit-driven businesses and can sometimes charge higher fees or push paid services harder than nonprofit organizations.

Can I do credit counseling on my own?

After you’ve evaluated the options, costs and potential savings, consider if what you’ll pay is worth the services you’re receiving. For example, if you’re comfortable with budgeting and making payments on your own, you might be able to pay off your debt without signing up for a DMP, potentially saving you money over time.

» MORE: How to choose a certified credit counselor

One of the most significant advantages of credit counseling is the ability to work with a financial expert for free or at a relatively low cost.

“Credit counseling can provide clients with valuable financial education and resources,” said Levon L. Galstian, founder and managing principal of SMB CPA Group. “This can include budgeting tips, debt repayment strategies and credit management advice. For example, a person who lacks knowledge of how to manage their finances may benefit from credit counseling and learn valuable skills for managing their finances.”

Despite the pros, credit counseling does not come without drawbacks. While some people pay no fees for credit counseling, this is only sometimes the case. And there’s no guarantee your creditors will be willing to lower your costs or payments. Plus, your credit score could take a hit.

“Enrolling in a DMP can have a negative impact on a person's credit score in the short term,” said Galstyan. “This is because the DMP requires a person to close their credit accounts and make regular payments to the credit counseling agency, which can show up as a negative mark on their credit report. However, this negative impact is generally temporary, and a person's credit score can improve over time as they make regular payments on their debts.”

» MORE: What affects your credit score?

While credit counseling can be a great option for some people, it’s not always the right choice. Some alternatives are:

• Debt consolidation: With a debt consolidation loan, you may be able to consolidate your higher-rate debt, like credit cards, into a lower fixed-rate debt. This can be a good option if you can afford to pay off the debt over a relatively short period and don’t have ongoing credit issues like active collections.
• Debt settlement: If you can’t afford to make your monthly payments, a debt settlement plan is an option. This is riskier than credit counseling or debt consolidation since the goal is to pay less than you owe. However, it can sometimes be a way to avoid filing for bankruptcy.
• Bankruptcy: After you’ve exhausted all other alternatives, you might decide to file for bankruptcy. This should be a last resort, as it can hurt your credit for years. Bankruptcy courts require you to meet with an approved credit counseling agency before filing. You can confirm if your credit counselor is approved by reviewing this list maintained by the Credit Counseling Unit at the Executive Office for U.S. Trustees (a division of the DOJ).