What is a Certified Credit Counselor?

If you’re looking to get out of debt, you might consider talking to a certified credit counselor. This term can describe a credit counseling agency or an individual who offers credit counseling services. As a result, you want to make sure that you’re working with someone you trust. Here’s what to look for when seeking credit and debt help.

A financial advisor can help you build a budget to settle your debt and control your spending.

Certified Credit Counselor Defined

A certified credit counselor is an individual or agency verified by an independent organization as a credit advisor. Becoming certified credit counselor involves completing coursework and passing an exam.

Certified credit counselors typically help consumers with:

• Creating and reviewing household budgets.
• Evaluating debt and creating a debt payoff strategy.
• Offering advice on improving credit scores.
• Bankruptcy and foreclosure counseling.
• Home-buying advice.

A counselor goes over your overall finances to help identify the cause of credit and debt issues. They also make plans to address those issues.

Some credit counseling agencies also structure debt management plans. They may negotiate payoff plans with creditors, help streamline monthly payments, and reduce interest rates. Instead of paying creditors directly, you pay the credit counseling agency a set amount each month. The agency then distributes that money to your creditors. You follow the plan until all debt is paid off.

There are for-profit and nonprofit credit counseling agencies. For-profit agencies charge a fee for their services. Non-profits may charge fees, but they may be lower. A nonprofit’s main source of revenue may come from grants.

How to Become a Certified Credit Counselor

A certified credit counselor requires certification by a recognized agency. There are two organizations that offer that certification. They are the National Foundation for Credit Counseling (NFCC) and the National Association of Certified Credit Counselors (NACCC).

NFCC Certification

A credit counselor certified by the NFCC as an individual must be employed by an NFCC member agency. So the NFCC can certify employees of a member credit counselor. But it can’t directly certify employees of non-member organizations. The NFCC offers certificates for credit, housing, and student loan counseling, as well as financial education. Once you’re certified, you have to renew your certification every two years to maintain it.

NFCC member agencies must also be certified by the Council on Accreditation (COA). The COA offers accreditation to credit counselors that adhere to a strict set of industry standards regarding for credit and debt counseling.

NACCC Certification

The NACCC allows you to enroll in credit counseling certification as an individual or as a group. The coursework is instructor-led, taught online, and costs $720 to complete ($895 if you want physical copies of course materials.) ¹ Topics include problem-solving, banking and credit basics, debt collection, bankruptcy, and consumer credit laws. Once you complete the course, you can apply to take the credit counselor certification exam.

A proctor conducts the exam online. The cost of the exam is included in the coursework fees. However, you may have to pay a $50 proctor fee depending on how you take the test. The test itself consists of 100 multiple-choice questions. You have to get a score of at least 70% to pass. ²

If you pass, you can receive your credit counseling certification. From there, you just have to complete 16 hours of continuing education every two years and pay a $100 renewal fee to get re-certified. ³

Why Work With a Certified Credit Counselor?

If you’re struggling with debt, a certified credit counselor is just one option for help. You can also get help from debt settlement or debt relief companies. In extreme cases, a bankruptcy attorney can assist you. However, unlike credit counselors, these individuals may lack certification for credit counseling services.

Consider seeking someone who’s completed the coursework, passed the exam and is accredited as a credit counselor. They can offer professional advice, look at your financial situation, and put their experience toward creating customized plan.

If you’re feeling overwhelmed by debt, counselors offer outside perspective. They can tell you what choices to make with your money.

What Credit Counseling Actually Costs and How to Avoid Overpaying

If you are already struggling to pay off debt, the last thing you need is an unexpected bill from the service you hired to help you get out of it. Knowing what credit counseling typically costs gives you a baseline for evaluating whether an agency’s fees are reasonable before you sign anything.

Non-Profit

At nonprofit credit counseling agencies, the initial consultation is usually free. This first session typically covers a review of your income, expenses and debts, and results in a general recommendation for how to move forward. If you do not need a formal debt management plan, you may not pay anything beyond this initial meeting. Some nonprofits offer ongoing budgeting and financial education workshops at no charge as well.

If you enroll in a debt management plan through a nonprofit agency, expect some modest fees. These fees vary by agency and by state, since some states cap what credit counseling agencies can charge. On average, the setup fees are around $50 and the monthly fee is around $35. ⁴ The monthly fee is typically included in your single monthly payment to the agency, so it does not come as a separate bill. Over the life of a three-to-five-year debt management plan, total fees may range from hundreds to thousands of dollars depending on the structure.

For-Profit

For-profit credit counseling agencies are less standardized in their pricing. Some charge flat fees for consultations, others charge a percentage of the debt being managed, and some bundle fees into products or services that may not be necessary for your situation. The lack of a consistent fee structure makes it harder to compare costs, which is why asking for a complete written breakdown of all fees before you agree to anything is essential.

There are costs you should never pay. Any agency that requires a large upfront payment before delivering services, charges for information that is available for free from government sources like the Consumer Financial Protection Bureau, or ties their fees to promises of specific credit score improvements is not operating in your interest. A legitimate credit counselor will explain their fees clearly during the initial consultation and will not pressure you to commit before you have had time to review the terms. If the fee conversation feels evasive or rushed, that alone is reason to look elsewhere.

Credit Counseling vs. Debt Settlement vs. Bankruptcy: Which One Is Right for You?

Credit counseling, debt settlement and bankruptcy all address debt, but they work in fundamentally different ways and are appropriate for different levels of financial distress. Choosing the wrong one can cost you money, damage your credit score unnecessarily or delay a resolution that a different approach would have reached faster.

Credit counseling is the least disruptive option and works best when your debt is manageable but you need structure and support to pay it off. A credit counselor reviews your finances, helps you build a budget and may set up a debt management plan where the agency negotiates lower interest rates with your creditors and consolidates your payments into one monthly amount. Your credit score may dip slightly when you enroll in a debt management plan, but the long-term effect is generally positive as you pay down balances consistently. This approach works when your total unsecured debt can realistically be paid off within three to five years on your current income.

Debt settlement takes a more aggressive approach. A debt settlement company negotiates with your creditors to accept less than the full amount you owe, sometimes significantly less. This sounds appealing, but the process requires you to stop making payments to your creditors while the company accumulates funds in a separate account to make lump-sum offers. During that period, your credit score drops, late fees and interest continue to accumulate, and your creditors may sue you for the unpaid balances. If a settlement is reached, the forgiven amount may be reported as taxable income by the IRS. Debt settlement is typically considered when the debt load is too large for a management plan but the debtor wants to avoid bankruptcy.

Bankruptcy

Chapter 7 bankruptcy discharges most unsecured debt entirely, giving you a clean start. It is available to individuals who pass a means test showing that their income is below a certain threshold relative to their state’s median. The process typically takes three to six months, but the bankruptcy stays on your credit report for ten years and makes it significantly harder to obtain credit, rent housing or pass certain employment background checks during that period. Chapter 13 bankruptcy does not discharge debt but restructures it into a court-supervised repayment plan lasting three to five years. It allows you to keep assets like a home or car that you might lose in Chapter 7. Chapter 13 stays on your credit report for seven years.

The right option depends on how much you owe, how much you earn, whether your debt is growing faster than you can pay it down and how much credit damage you can absorb. If your debt is under control but you need help organizing payments and reducing interest rates, credit counseling is the starting point. If full repayment is unrealistic but you want to avoid bankruptcy, debt settlement may reduce the total amount owed at the cost of credit damage and potential tax liability. A final option is bankruptcy. If your debt is overwhelming and no repayment plan is viable it provides legal protection and a path forward. However, it comes with significant long-term consequences. A certified credit counselor can help you evaluate which path fits your situation during an initial consultation, and that assessment is usually free.

How to Find a Certified Credit Counselor

If you’re considering credit counseling, here are a few tips for finding a reputable agency or individual:

• Check their accreditation. Look for credit counselors that are certified by the Council on Accreditation or the Financial Counseling Association of America.
• Contact the NFCC and the FCAA for recommendations for credit counselors. Both organizations offer a free locator tool on their websites to help you find certified credit counselors in your state.
• Ask about fees upfront. Specifically, determine whether the agency or individual operates on a for-profit or non-profit basis and what fees they charge.
• Get a rundown of counseling services. You might need counseling for a specific type of debt, such as credit cards or student loans. Or you may need something more comprehensive that covers your entire financial picture.
• Read the fine print on any forms that require a signature. Don’t agree to anything without reviewing the terms first.
• Watch out for credit counseling scams. If they won’t tell you their fees, makes big promises, or ask for money up front, proceed with caution.

Bottom Line

Credit counseling can help you get a better grip on your finances but it’s important to understand what a certified counselor can and can’t do for you. For example, a credit counselor can help you work out a plan for repaying your debt but they can’t offer a quick fix for increasing your credit score by 100 points overnight. However, asking the right questions can help you find a credit counselor to work with and ensure that you have realistic expectations about what you can achieve.

Credit and Debt Management Tips

• Credit counselors don’t offer in-depth advice on things like investing or planning for your long-term financial goals. For that, you may want to talk to a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Remember that there are certain actions you can take to repair credit yourself before hiring a credit counselor. For example, you can review your credit reports from Equifax, Experian and TransUnion to check for errors. If you spot an error or inaccuracy, you can dispute it for free through the credit bureau’s website. This can help remove or correct errors, which could improve your credit score.

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