5 Things You Should Know About Credit Counseling

Sarah PowellPosted by Sarah Powell on July 29, 2016

Credit counseling can be a long process, but it is one of the best ways to get your finances in order and put yourself and your family in a position where you can build wealth and improve your credit scores.

When you’re having trouble paying your bills or if you just don’t seem to have any money left over after paying your bills every month, then someone might have suggested that you try credit counseling. These programs are a great way to have a professional review your budget and suggest ways to save while paying down your debt. Before you decide to try credit counseling, however, you should know a few things.

  1. Going to a credit counselor won’t affect your credit score. One of the biggest reasons that people enter credit counseling is because their credit score is preventing them from buying a car, home, or other major purchase. It’s important to realize, however, that simply showing up for credit counseling will not improve your score. Improving your credit score is a process that takes a lot of time and requires you to keep up one-time, full-debt payments. While credit counseling can help you to stick to a bill-paying schedule and make it more likely that you will have money in your account to pay your bills, it will not automatically raise your score.
  2. Your counselor cannot make you do anything. Signing up for credit counseling doesn’t mean that you’re turning over your finances to another person. While a trained, professional credit counselor can review your bills and accounts, he or she will not pay your bills for you or force you to stick to a budget. They can only make suggestions as to how you should spend and save your money. It’s up to you to decide what to do with that advice. The credit counselor cannot force you to do anything.
  3. Every situation is different.  All too often, people hear about a friend or relative who went through credit counseling and assume that they’ll have a similar experience. The truth is that because everyone’s financial situation is different, everyone will get different advice from their credit counselor. For example, people with very similar levels of debt might get advice ranging from picking up extra hours at work to make more money to selling their car in order to pay off more debt. The exact advice will depend on a lot of different factors that the credit counselor reviews with his or her clients.
  4. You might not like some of the suggestions. The suggestions that a credit counselor makes will not always be easy to comply with. While developing a bill-paying schedule or giving up bottled drinks at gas stations might be relatively easy to do, other suggestions may require major lifestyle changes to fix your finances. In some cases, credit counselors have proposed that their clients get a second job, sell a car or home, remove their children from private school, and/or cut up their credit cards. Keep in mind, however, that it’s very rare for clients to be given a single option. For example, a client may be told that in order to reduce their debt they need to sell their home and look for cheaper housing or cut back on spending in areas such as dining out. While the choices might not be easy, it’s important to remember that you have options.
  5. You have to be honest. The most important thing to remember as you go through credit counseling is to be honest with your counselor. Keeping credit card accounts or a record of bankruptcy a secret from your counselor only makes it impossible for him or her to give you effective advice. These are professionals who have an obligation to keep your personal information confidential. It’s also helpful to know that most of them have heard and seen a lot of cases, so odds are your situation isn’t the worst they’ve seen. It may also help to know that you can always request a private meeting with your financial counselor, even if you’re in counseling with other family members.

Credit counseling can be a long process, but it is one of the best ways to get your finances in order and put yourself and your family in a position where you can build wealth.