What you need to know about credit counseling
If you’re juggling multiple debts and aren’t sure how to pay them off, struggling to get by on a limited income, or just want financial guidance, a credit counselor may be able to help you create a personalized plan. Here’s what you should know before you get started.
What are credit counseling services?
Credit counselors are certified—and in many states, licensed—nonprofit advisors trained to help you take control of your finances, reduce debt and use credit responsibly. Counselors work with you to review your income, expenses and debts. Depending on your needs, they can help you create a personalized budget , set up a debt management plan or outline a general plan of action for your finances.
Who is credit counseling for?
The most common reason for seeing a credit counselor is to get help reducing credit card debt. Many counselors also provide general financial education and help with budgeting issues, such as breaking out of a paycheck-to-paycheck cycle . Other services may include:
Managing credit cards
Housing, including buying a first home, making mortgage payments, foreclosure and reverse mortgages
Recovering from natural disasters
Repaying student loans
Article continues below
Related content
Pay off credit card debt faster
Explore visual story , 1 minute
Manage your money when living paycheck to paycheck
6 ways to tackle financial stress
Read more , 5 minutes
Here’s how much a risky payday loan could cost
View infographic , 3 minutes
What is a debt management plan?
A debt management plan is an agreement between you and the credit counseling service to pay off your credit cards. The credit counselors negotiate with your creditors to come up with monthly payments you can afford. Often, creditors will lower interest rates and payments, waive late fees and hold off on debt collection as long as you’re on a debt management plan. In exchange, you make a single monthly payment to the counseling service, which then distributes the money to your creditors. Your payments continue until the debts are paid off, often for four years or longer. During that time, you’ll be required to close all credit card accounts to ensure you don’t take on additional debt. You also may not be able to open new credit cards or get approved for new loans.
How much does credit counseling cost?
Many nonprofit credit counseling agencies charge nothing or very little for an initial consultation. More extensive services, such as a debt management plan, typically have a setup fee and ongoing maintenance fees. The agency should be clear and straightforward about any fees that are required.
How do I choose a credit counselor?
Most reputable credit counseling agencies operate as nonprofit organizations. The counselors are certified and trained in credit, debt management and financial education. In addition to certification, most states require credit counselors to be licensed by a state agency.
Ask what services they offer, what fees you’ll be expected to pay, and how they safeguard your personal information. If a prospective credit counselor can’t answer these questions or puts you ill at ease, keep looking.
To protect yourself from unethical individuals posing as credit counselors, avoid anyone who:
- Can’t confirm that they’re certified or licensed, if required in your state
- Won’t answer basic questions unless you reveal personal details
- Requires money up front
- Promises to make your debt disappear without any work on your part
Finding a credit counselor
These government agencies and organizations have guidelines and lists to help you find a reputable credit counselor.
Quick tip
Beware of companies advertised as debt relief or debt settlement agencies. These for-profit companies typically charge fees to negotiate a debt reduction settlement with creditors. The Federal Trade Commission warns these programs are risky. There’s a chance you could end up owing more, dealing with debt collectors, and damaging your credit report and credit score.
What can I expect from a session?
Your first session will probably last about an hour. It can be done in person, virtually or on the telephone. Some agencies offer self-guided, online programs. Expect to share information about your income, debts, expenses and use of credit, as well as your short- and long-term goals. If you’re expecting changes to your finances, like a reduction in salary, that’s important, too. The more honest you are, the better the counselor will be able to understand your financial situation and offer strategies for paying off debt and managing credit.
How many times should I see the counselor?
A reputable counselor won’t have a limit. You may need just one session to set up a workable budget. Or if you might benefit from a plan to repay unsecured debt, you might sign up for repeat sessions and pay small, ongoing fees until you pay down the debt. You can talk with a counselor before you sign up to make sure that kind of program will accomplish your goals.
Negotiating with creditors
Transcript
Credit counseling FAQ
What are the pros and cons of credit counseling?
Credit counseling is a valuable service for many but can have some drawbacks.
Pros
- Accessing a wide range of expert financial guidance at little to no cost
- Receiving one-on-one help to define financial goals and make a plan to reach them
- Creating a detailed plan to repay credit card debt and boost your credit score
- Help negotiating with creditors to lower interest rates on debts and to not pursue collection efforts
Cons
- Finding a reputable credit counseling agency requires careful research
- Completing a debt management plan can take years
- Access to credit can be limited while you’re on a debt management plan
Does credit counseling affect your credit score?
Credit counseling alone won’t directly affect your credit score . It’s possible, however, that your credit score could temporarily dip if you close credit card accounts as part of a debt management plan. Closing accounts raises your credit utilization ratio, which is the percentage of available credit you’re using. It is the second most important factor, after on-time payments, in calculating your credit score. As you make progress paying your debt, your score should improve. And any initial ding to your credit score is far outweighed by the long-term benefits of reducing debt.
What’s the difference between credit counseling, debt settlement and credit repair?
Credit counseling:
- Helps you make a plan to pay off your debt and get a handle on your finances.
- Counseling is usually offered through nonprofit organizations that charge no or very low fees.
Debt settlement companies and credit repair companies:
- Are typically for-profit companies.
- They may change you money for taking actions you can do yourself for free, according to the consumer Financial Protection Bureau.
What happens if I miss a payment in the debt management plan?
Contact your credit counselor as soon as possible. You may be able to pay late, especially if your creditors have waived late fees. If you don’t have the money for your full payment, pay as much as you can. Your counselor should know which creditors to pay first. Some creditors might leave the plan if payments are missed, while others may be more flexible.
What types of debt can be included in a debt management plan?
The most common debt in debt management plans comes from credit cards. Other unsecured debt, such as medical bills and personal loans, may be included. Secured loans, such as those for houses (like mortgages and home equity loans) and auto loans, cannot be included.
Disclaimer
The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America Corporation and/or its affiliates assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. ©2025 Bank of America Corporation.
What to read next
More from Bank of America
Bank of America Life Plan® helps you create a plan that’s tailored to your goals.
Contact us
We’re here to help. Reach out by visiting our
Contact page or schedule an appointment today.
Schedule an appointment
Advertising Practices
We strive to provide you with information about products and services you might find interesting and useful. Relationship-based ads and online behavioral advertising help us do that.
Bank of America participates in the Digital Advertising Alliance (“DAA”) self-regulatory Principles for Online Behavioral Advertising and uses the Advertising Options Icon on our behavioral ads on non-affiliated third-party sites (excluding ads appearing on platforms that do not accept the icon). Ads served on our behalf by these companies do not contain unencrypted personal information and we limit the use of personal information by companies that serve our ads. To learn more about ad choices, or to opt out of interest-based advertising with non-affiliated third-party sites, visit YourAdChoices powered by the DAA or through the Network Advertising Initiative’s Opt-Out Tool. You may also visit the individual sites for additional information on their data and privacy practices and opt-out options.
To learn more about relationship-based ads, online behavioral advertising and our privacy practices, please review the Bank of America Online Privacy Notice and our Online Privacy FAQs.
Connect with us
- Bank of America
- Privacy
- Children’s Privacy
- Security
- Careers
- Sitemap
- Advertising Practices
- Education Resource Center
- Terms of Use
- Accessible Banking
Your Privacy Choices
Some materials and online content may be available in English only.
Bank of America, N.A. Member FDIC. Equal Housing Lender
© 2025 Bank of America Corporation. All rights reserved.
Are Not
FDIC Insured
Are Not
Bank Guaranteed
May Lose Value
Bank of America and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
How can credit-counseling services help debt-troubled individuals and families
Between today’s record-high credit card rates , the compounding nature of credit card interest and the elevated borrowing costs on other types of loans, lots of Americans are dealing with debt-related issues right now. Managing any debt — and high-rate debt in particular — can be a daunting challenge, especially as the bills start piling up and the interest charges make repayment feel insurmountable . The good news is that you don’t have to take on the task alone. There are certain types of debt relief options, like credit counseling , that can help.
With credit counseling, you’re offered financial education and debt management solutions that have h
elped countless other people regain control of their finances . However, credit counseling isn’t a magic solution that makes debt disappear overnight. While these services can provide valuable tools and strategies for managing debt , they come with both capabilities and limitations that you should understand before seeking help. After all, credit counseling tends to work best when you have realistic expectations about what these services can and cannot accomplish.
To decide if credit counseling is right for your situation, it’s also important to understand the outcomes that you can reasonably expect. By arming yourself with this information, you’ll be better prepared to decide whether credit counseling aligns with your financial goals and unique circumstances.
What credit counseling can do to help with your debt
Credit counseling services offer several powerful tools to help tackle your debt challenges. To start, they provide expert financial education and personalized advice, which can be invaluable when you’re trying to get rid of high-rate debt . As part of the program, a certified credit counselor will review your complete financial situation, including income, expenses, assets and debts, to help you understand your current position and develop a realistic budget. This educational component helps you build better money management skills that can prevent future debt problems.
Another significant benefit is access to debt management plans . With this type of plan in place, the credit counselor works directly with your creditors to potentially secure lower interest rates and fees, which can make your debt more affordable overall. The counseling agency also consolidates your various debt payments into a single monthly payment, which they then distribute to your creditors. This simplification can make debt repayment more manageable while potentially saving you money through reduced interest charges.
Credit counselors can also serve as advocates on your behalf when dealing with your creditors. They understand the industry’s inner workings and can often negotiate more effectively than you could if acting alone. In addition, they can help you understand your rights as a consumer and explain various debt relief options if necessary so you can make informed decisions about your financial future.
Many agencies also provide specialized counseling for specific financial challenges, such as student loan debt, housing issues or small business finances. These focused services can offer targeted strategies for particular types of debt that may require different approaches than general consumer debt.
What credit counseling can’t do to help with your debt
Despite their many benefits, credit counseling services have limitations that you should understand as well. Perhaps most crucially, they cannot eliminate or reduce the principal amount you owe. Unlike debt relief companies , credit counselors don’t negotiate to reduce the actual balance of your debts — they can only work to reduce interest rates and fees.
Credit counseling also cannot force creditors to participate in a debt management plan or accept modified payment terms. While many creditors regularly work with credit counseling agencies, participation is voluntary. Some creditors may refuse to participate or offer less favorable terms than you hope to receive.
These services cannot repair damaged credit immediately, either. While following a debt management plan can eventually lead to improved credit scores , this process takes time — and typically requires several months or years of consistent payments. Enrolling in a debt management plan may also be noted on your credit report, which some future creditors might view negatively.
Credit counseling cannot provide emergency funds or quick fixes for immediate financial crises, either. While credit counselors can help you develop a long-term plan to approach your debt, they don’t provide loans or direct financial assistance. If you need immediate cash for essential expenses, you’ll need to explore other options.
Finally, credit counseling cannot change your financial behaviors — that responsibility lies with you. While credit counselors provide education and tools, success ultimately depends on your commitment to following the prescribed budget and making consistent payments.
The bottom line
Credit counseling can be an invaluable resource for those struggling with debt by offering education, structured repayment plans and professional guidance through financial challenges. However, it’s crucial to approach these services with realistic expectations about what they can and cannot accomplish.
For many people, though, credit counseling represents an important first step toward financial stability, providing the knowledge and tools needed to manage debt effectively. The key is understanding that while credit counseling can help create a path out of debt, walking that path requires personal commitment, patience and consistent effort over time.
Angelica Leicht is the senior editor for the Managing Your Money section for CBSNews.com, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
© 2025 CBS Interactive Inc. All Rights Reserved.
https://bettermoneyhabits.bankofamerica.com/en/debt/credit-counselinghttps://www.cbsnews.com/news/what-credit-counseling-can-and-cant-do-to-help-with-your-debt/
