What is Credit Counseling and is it Right for You?
Money Management International is one of the nation's largest nonprofit credit counseling organizations. But what does that mean for you?
Who qualifies for credit counseling?
Everyone. Literally everyone. Credit counseling, also known as debt and budget counseling, is a free service available to anyone who wants to take part. Many of the individuals who take part in a credit counseling session are dealing with unmanageable debt, but having debt isn’t a prerequisite.
Who needs credit counseling?
Anyone concerned about the current state of their finances can potentially benefit from speaking with a trained counselor. Credit counseling is especially beneficial for consumers who struggle to make ends meet each month, whether that's due to carrying a large amount of debt or because of unusually high expenses.
Try our 20 question Financial Wellness Test to see if there are any red flags that you may want to address with a free counseling session.
What happens during a credit counseling session?
Credit counseling is a discussion of your financial situation, coupled with expert guidance and advice designed to help you solve problems and reach goals. Basically, your counselor will map your income and expenses, creating a budget based on how you spend your money. They’ll also pull a copy of your credit report and review the status of your current debts.
With that information as a framework, together you’ll discuss your financial goals. What changes would you like to see? What do you feel is holding you back?
Understanding your goals and your present situation, your counselor will then provide you with an action plan, which will include suggested steps you may take in order to reach your goals.
One of those suggested steps may be a debt management plan or DMP. A DMP is a creditor-negotiated repayment plan designed to fit your financial capacity and repay eligible debts within a set period of time (usually five years). If you decide that a DMP is right for you, there may be fees involved. Completing a credit counseling session does not obligate you to begin a DMP.
What do I need to bring to my credit counseling session?
You’re not required to bring anything, but it’s very helpful to have copies of your most recent bills and bank statements available. This will help your counselor get a more accurate understanding of your finances.
Who will know that I spoke with a credit counselor?
No one. Not unless you want to tell them. Counseling sessions are confidential. Your creditors will not be informed that you spoke with a credit counselor. Neither will your employer or family members. We take client confidentiality very seriously.
Will it hurt my credit score?
Speaking with a credit counselor will not impact your credit score or be reported in any way on your credit report.
If you decide to enroll in a debt management plan, however, creditors may choose to add a notation to those debts on your credit report. This notation will not impact the calculation of your credit score.
How do I speak with a credit counselor?
You don’t need to be in financial distress in order to benefit from speaking with a credit counselor. If you’re simply dissatisfied with the amount of money left over at the end of the month and don’t know where to begin making improvements, speaking with an experienced counselor can help.
Everyone, at every point in their life, can benefit from a little expert advice. If you don’t feel confident in how you’re managing your money, consider speaking with a counselor today.