If you're lost in a mire of debt, a credit counselor can help.
There are many routes to debt problems. You may have lost your job and been swamped with bills, or you may be stuck with credit card balances that aren't going down. Perhaps you want to tackle your debt before you retire, or you have missed some payments and want to get back on track before your accounts go to collection.
No matter how you got swamped with debt, a credit counselor can help you work on a budget, learn about lenders’ hardship programs, or enroll in a debt management program that reduces your payments and interest rates. But there are also a lot of scam artists that prey on people who are worried about their debt. Here's how to find a credit counselor you can trust, and what to expect when you work with one.
How credit counseling works
Credit counselors can provide several levels of help, typically starting with a free budget counseling session. “Once the counselor reviews how they're spending their money, and their income and their debts, then they can make a suggestion,” says Heather Murray, manager of community relations for Advantage Credit Counseling, a Pittsburgh-based credit counseling agency that serves clients in 37 states. “We try to give the client options of what could be a good fit for them."
If you need short-term help — say you've lost your job and you're worried about paying your bills for a few months until you get a new job or start to receive unemployment benefits — a credit counselor can review your budget and set priorities for how you use your limited money. The credit counselor can also let you know about lenders’ hardship programs that let you skip payments or reduce your interest rate if you lose your job or face other financial challenges. Many have special COVID relief programs, too.
"A lot of creditors this past year have worked with their clients and have offered deferments on their credit card payments,” says Murray. “Each creditor has handled it differently.” Learning about your options from all of your creditors helps you triage your payments if you can't afford to make them all — at least until you start to receive unemployment benefits or get a new job.