You are here: Home Finances Credit: Score, ... Credit Counseling ... Summary
Information about all aspects of finances affected by a serious health condition. Includes income sources such as work, investments, and private and government disability programs, and expenses such as medical bills, and how to deal with financial problems.
Information about all aspects of health care from choosing a doctor and treatment, staying safe in a hospital, to end of life care. Includes how to obtain, choose and maximize health insurance policies.
Answers to your practical questions such as how to travel safely despite your health condition, how to avoid getting infected by a pet, and what to say or not say to an insurance company.


Credit counseling services are agencies that will help solve your financial problems. Many of them work for free or for very low cost.

Be careful in picking which company to use. There are unscrupulous credit counseling services that charge high fees and are interested only in taking as much of your money as possible. At least one agency with high fees tries to lure customers by advertising as a "non-profit," as if the fact they are a non-profit organization will get you to ignore how much they charge you.  

Before agreeing to anything in writing, do your homework about a service. 

Keep in mind that if you settle a debt for less than the amount owed, the transaction becomes a negative on your credit score and stays on your credit report for seven years. You may also owe income tax on the amount forgiven in a settlement. To learn more about the tax situation, see IRS Publication 4681 which is available at:  offsite link or speak with your accountant.

NOTEPrior to using a credit counseling service, consider negotiating with creditors on your own. Also consider whether or not bankruptcy might be better for you. Since credit counselors receive their funds from your creditors and sometimes from fees they charge you (often on a monthly basis), they generally won't recommend bankruptcy -- even if it's your best option.

NOTE: Credit counseling services are not credit repair services. Credit repair services promise to repair your credit for a fee. In reality they cannot do anything about your credit that you cannot do on your own.

To Learn More

What Does A Credit Counseling Service Do?

Credit counseling services generally:

  • Provide educational materials.
  • Have workshops on personal money management.
  • Structure a debt repayment plan.
  • Negotiate for you with creditors.

Credit counseling services were originally set up to help creditors. The services are paid by creditors.

Some credit counseling services may charge you as well as the creditors in resolving your debts. However, some of them are free for you.

If you are having trouble paying your bills, a credit counseling service may be able to help.

Before considering an agency that you have to pay, ask your attorney, legal aid society, or your disease specific non-profit for assistance.

How To Locate A Reputable Credit Counselor

You can locate a reputable credit counselor by checking with the following professional organizations of consumer credit counseling agencies:

  • The National Foundation for Credit Counseling (NFCC). Members are accredited by the Council on Accreditation of Services for Families and Children ( offsite link), which monitors the NFCC's member standards. You can locate a local agency member using the search engine on the NFCC website offsite link or call 800.388.2227
  • The Association of Independent Consumer Credit Counseling Agencies (AICCCA). AICCCA maintains member standards that include counselor training and sets maximums on the fees that members can charge for debt-management programs. You can locate a local agency at offsite link.

How To Choose A Credit Counseling Service

Red flags: Stay away from companies that do any of the following:

  • Refuse to send you information without first obtaining details about your situation.
  • Pressure you or give you a deadline for returning an application.
  • Ask you to make an up-front "contribution" based on the amount of your debt.
  • Promise to "repair" your credit -- and charge you fees for it.

Background Check: Check with your state Attorney General's office, local consumer protection agency, and the Better Business Bureau ( offsite link) to find out if consumers have filed complaints about the counselor you are considering.

Questions: Once you have located a reputable counseling agency you think you might want to work with, ask about:

  • Fees --
    • What are their fees?
    • What are the fees based on?
    • When do you pay them?
  • Services --
    • What services does the company offer?
    • Do they have educational materials?
    • Are they online?
  • Funding --
    • How is the company funded?
    • Is the service a non-profit organization? (A company's non-profit tax status doesn't guarantee its legitimacy, or necessarily mean lower fees)
  • Counselors --
    • What are their counselors' qualifications?
    • Are the counselors accredited or certified? If not, how are they trained?
  • Confidentiality --
    • What procedures do they have to ensure that your personal information remains confidential?
    • Can the service give you any confidentiality procedures in writing?

What Is A Debt Repayment Plan?

Credit counselors often will work out debt repayment plans with your creditors. Under these plans, your creditors usually agree:

  • To reduce the rate of interest.
  • To waive or reduce penalties.
  • To permit you to repay your debt according to a payment schedule which the counselor develops with your input. You deposit money each month with the credit-counseling agency. The agency then pays your creditors.

To stay in the plan, you can't use any of the credit cards that you put into the plan. If you have a credit card on which you can afford to make the payments as they currently exist, consider keeping it out of the plan. This will help you maintain your credit rating and give you access to funds in an emergency.

If you have more than one card that you could keep out of the plan, pick the one that has or on which you can get credit insurance.

Debt repayment plans could worsen your credit rating. Creditors might report your account as being in financial counseling. Also, any payments you missed or made late less than seven years ago will remain in your file-even after you've started the plan.

In addition to being paid by the creditors, some agencies charge you for developing and managing the plan. The fee will often be payable monthly, based on the number of creditors in the plan. This cost might be more than offset by the lower interest rates and removal of late or over-the-limit fees that the agencies may be able to negotiate. However, keep in mind that there are agencies which don't charge for this service.

What Is A Credit-Repair Company?

Credit repair companies claim that they can erase bad credit or help you to establish a new "credit identity." There is no company that can legally do anything more than you can do on your own about erasing a report of bad debt. NO company can legally give you a new credit history.

In reality, these companies will likely try to "help" you by:

  • Convincing you to apply for bankruptcy, which may not be right for you but can earn them fees.
  • Helping you establish an IRS Employer Identification Number under false pretenses.
  • Questioning the items on your credit report -- something that you can do yourself for free and which, if anything at all, may result in an only temporary withdrawal of negative entries from your report. See Credit Scores.

Instead of a credit repair companies, try a reputable, no-fee to you, credit counseling service.


Special thanks to:
Joseph Daniel
New York, New York