Inside the Session: What Actually Happens During Credit Counseling?

Carrying any kind of debt can feel overwhelming, but you’re not alone. American consumers owe an average of $104,755 across mortgages, auto loans, and credit card debt, according to Experian, 

Even as debt can feel like an enormous burden, there are ways you can tackle it. Credit counseling services are available no matter how much you earn or where you live. WorkMoney breaks down what happens in your first session, potential solutions, and what you can expect from seeking credit counseling help.

What is Credit Counseling?

Credit counseling is when you enlist the help of a credit counseling organization to help you with money. Whether you need help creating a budget, building a debt repayment plan, or managing your money, credit counseling allows you to talk to an expert about your financial concerns.

Nonprofit Credit Counseling vs. Debt Relief Company

Whether you have a couple of hundred dollars worth of outstanding bills or you’re drowning in six-figure debt, credit counselors can help. But there are different types of assistance, and not all of them have your best interests in mind.

Nonprofit credit counseling provides financial and debt counseling for little to no cost. You might be a good fit for a debt management plan, a dedicated payment plan that helps you tackle your outstanding debt. Your counselor should act as your advocate, helping you use resources to get your finances on track. You should receive support, not sales pitches.

Debt settlement companies work on your behalf to settle your outstanding debt, usually for less than what you currently owe. These are for-profit companies that charge fees for their services and may advise you to stop paying your debt until they have negotiated a settlement. Nonpayment could put you into further debt and make it more difficult for you to borrow money in the future. Beware of companies that request upfront fees before settlements are reached — this is illegal.

What Happens During Your First Credit Counseling Session?

Once you’ve found a credit counselor, you’ll prepare for your first session by gathering your documents, like:

• Sources of income: paychecks, child support, Social Security, or any other way you earn regular income.

• Recent bills: monthly, quarterly, and other regular bills, including rent/mortgage, utilities, phone, cars, taxes, insurance, and any overdue payments.

• Creditors: Have a list of your current creditors, including student loans, car loans, personal loans, credit card issuers, buy now, pay later (BNPL) services, or other lenders.

• Statements: Bring copies of statements for all your assets and liabilities, including checking and savings accounts.

This step can feel time-consuming, especially if you have a lot to organize. But doing the work early on makes it easier for you and your credit counselor to craft your personalized management plan. Come with an open mind and ready to work on making concrete changes.

Your credit counselor will guide you through the session. You’ll both review your documents, discuss your financial situation, and work together to build a realistic budget. The session normally lasts about an hour. 

What Comes After Your First Credit Counseling Session?

After your first credit counseling session, you should have a clear idea of what happens next. For some, this could be a free, detailed action plan to tackle your debt and manage your budget.

You may end up with a debt management plan (DMP), where you make one monthly payment to the credit counseling agency, and your agency pays your creditors on your behalf. Some credit counselors negotiate on your behalf to lower the amount owed, interest rates, and fees, but that’s not guaranteed.

These plans restrict your credit usage, which means you won’t be able to apply for new credit while under a DMP. You might be charged a fee for this, but rates vary by agency and where you live. 

DMPs aren’t necessary for everyone, so your first session with a credit counselor should help you figure out if getting one is right for you. Otherwise, you may be scheduled for upcoming sessions on budgeting, money management, and general financial coaching.

Where to Find Credit Counseling

You can find real, reputable credit counselors that meet you where you’re at, whether that’s online, over the phone, or in person. Look for accredited counselors through the National Foundation for Credit Counseling (NFCC), Financial Counseling Association of America (FCAA), and the Department of Justice. 

You can also get help through GreenPath, a national nonprofit that works on your behalf to simplify payments, lower rates, and pay off your debt faster.

Depending on where you live and work, you might have more credit counseling options through military bases, housing authorities, and credit unions. 

Your Rights as a Client

It’s normal to feel shame for something like debt. But taking these steps to meet with a credit counselor is one of the best ways to tackle it. 

Credit counselors shouldn’t pressure you into signing up or paying for a particular program. Reputable, accredited agencies should provide you with free information and resources. Any services that require fees should be discussed up front, with clear expectations that include the costs and potential negative impacts of those services. Don’t sign up for anything without reading what it entails and what you’re obligated for.

If you’re worried you’re getting scammed or you’re dealing with an agency that isn’t managing your case as originally expected, you can report these to the FTC.

The Bottom Line

Chances are, you’ve felt the need to make this move for some time, so it’s normal to feel a mix of emotions during your first session. This is a big step toward creating meaningful, lasting change surrounding your finances, and one you can feel proud of. 

Remember, your first session is free. True nonprofit credit counselors act in your best interest. Know your options and let your counselor guide you. Asking for help isn’t always easy; be proud of yourself for getting here.