What is a Credit Counselor?
Credit counseling is often promoted as the best option for individuals who are having trouble managing their debt. In fact, the Credit CARD Act calls for credit card issuers to publish, on card statements, a toll-free number for consumers to get credit counseling help.
A credit counselor is someone who acts on behalf of the debtor to negotiate with creditors to resolve debt that is beyond a debtor's ability to pay. They help individuals get a complete picture of their finances, including their income, expenses, and assets. They offer credit counseling on improving credit, paying off debts, having a secured loan vs an unsecured loan, and laying out the options for handling debts. A credit counselor will also provide educational materials, courses, or seminars to teach healthy spending habits and money management skills.
What does a Credit Counselor do?
When consumers contact a credit counseling agency, they are offered a counseling session with a credit counselor where they share information about their income, expenses and debts. A credit counselor examines a client's financial situation and helps to come up with a plan to reduce the debts and build assets. They can often negotiate with creditors and make arrangements that are positive for all parties. Creditors often offer better terms to overdue clients if a credit counselor steps in on their behalf. Counselors can also help create a money management plan, and a debt pay down plan, as well as provide free resources and workshops related to money management.
Credit counselors help people that:
- are feeling overwhelmed by the amount of debt they have, and want a face-to-face relationship with someone who can give them a better financial understanding
- are unsure of how to approach their creditors about a settlement, or a payment plan and would like help with that process
After the consultation, a credit counselor may offer the individual a Debt Management Plan (DMP). While the terms “credit counseling” and “debt management” are sometimes used interchangeably, they are not the same thing. Credit counseling refers to the counseling session aimed at improving a person's finances, while a debt management plan means turning over an individual's finances to a company that one makes monthly payments to, and that passes those payments along to the creditors.
Credit counselors take care of all the DMP details for their clients - they negotiate with each creditor to lower the consumer’s monthly payment amount, to lower the interest rate, and to possibly waive any outstanding late fees. The debt is then ‘‘consolidated’’ into a single payment.
What is the workplace of a Credit Counselor like?
Most credit counselors are employed by credit counseling agencies dedicated to assisting consumers with housing, employment and credit issues. Some of the agencies are non-profits that charge at no or non-fee rates, while others can be for-profit and include high fees. Some credit counselors are freelancers who find their own clients or work with credit counseling agencies as contractors.
Credit Counselors are also known as:
Certified Credit Counselor Financial Health Counselor Certified Personal Finance Counselor Financial Coach Financial Wellness Coach Debt Counselor