We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Credit Counseling?

Michael Pollick
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Credit counseling has become an increasingly popular alternative to the legal procedure known as bankruptcy. As federal guidelines for filing bankruptcy continue to tighten, more and more credit counseling services are setting up shop to help consumers manage their debts and fend off aggressive collection agencies. These agencies are designed to be non-profit, which means the majority of a client's payments must be earmarked for debt repayment. Credit counseling organizations can legally collect a small fee for administrative costs, but cannot profit from collection fees or interest charges.

In a typical credit counseling situation, an individual may find that his or her financial obligations are not being met with income alone. He or she may only be making minimal payments on credit card balances and falling behind on other debts. Some of their creditors may have already started collection proceedings or other legal action. Declaring bankruptcy in an effort to reorganize his or her debts may seem like the only possible solution. But bankruptcy proceedings stay on a person's credit record for at least seven to ten years. Lawyers who specialize in bankruptcy filings are entitled to a fee for their legal advice. Federal judges assess the debtor's ability to pay and may require a substantial amount of monthly income be held by a trustee.

This is where a non-profit credit counseling service could provide a better alternative. A debtor can bring all pertinent documentation of his or her outstanding debts to a trained credit counselor. This advisor often works as a liaison between the credit card companies and their customers. Once the credit counselor has added all of the outstanding balances and monthly payment obligations together, he or she will calculate a single payment to the credit counseling service which will address all of the creditors. Quite often the creditors are willing to accept these repayment terms in order to avoid the expense and questionable results of traditional collection methods.

Credit counseling does have some negative aspects, however. Credit cards may have to be completely surrendered in exchange for lenient repayment terms. The use of a credit counseling service may be just as damaging to a consumer's credit rating as a Chapter 13 bankruptcy filing. Some unscrupulous agencies are actually non-profit extensions of 'for profit' enterprises. The monies collected by the non-profit entity may be funneled into the 'for profit' accounts and not the actual debts. Anyone seeking credit counseling advice should check out the agency's Better Business Bureau file and ask the advisor direct questions during the initial consultation.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Michael Pollick
By Michael Pollick
As a frequent contributor to SmartCapitalMind, Michael Pollick uses his passion for research and writing to cover a wide range of topics. His curiosity drives him to study subjects in-depth, resulting in informative and engaging articles. Prior to becoming a professional writer, Michael honed his skills as an English tutor, poet, voice-over artist, and DJ.
Discussion Comments
By surfNturf — On May 07, 2011

@SauteePan - I know that there are credit counseling companies out there that help you settle your credit card balances but can’t you do that yourself?

I recently heard a financial advisor on a talk show discuss this very topic. He said that you can settle with the credit card companies for pennies on the dollar.

He said that as long as you get this in writing and do not give them access to your bank account you should be able to settle these accounts yourself and not pay a credit counseling company any money.

I just wondered if that was true or not. He did say that your accounts had to be in collection status.

By SauteePan — On May 06, 2011

@Anon8487 - I am not really sure. I think that it is best to contact the credit counseling company that you originally dealt with as well as the credit reporting agency in which you saw that listing.

I don’t know how long something like that typically stays on your report. I do hope that the nonprofit credit counseling helps you to reestablish your credit rating again.

By anon8487 — On Feb 14, 2008

I recently completed credit counseling and all of my credit bills are paid off. However, the credit reports still say something like, "Account managed by Credit Counselor". How do I remove these account status items since the accounts are no longer managed by a credit counselor?

Michael Pollick
Michael Pollick
As a frequent contributor to SmartCapitalMind, Michael Pollick uses his passion for research and writing to cover a wide...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.