7 Myths About Credit Counseling

Having financial problems can be isolating.

According to a survey from NerdWallet, a third of people with credit card debt haven’t told a single person how much money they owe. That makes more than 55 million credit-card holders who are keeping their debt a secret, not to mention countless others who aren’t talking about their mortgage troubles, high student loan payments and other financial problems.

If you’re ready to break the silence and get help with your debt and credit, or you just want to toward a specific financial goal, credit counseling is a great place to start.

Despite what you may have heard or even assumed, most credit counseling services are free, and a Certified Consumer Credit Counselor can give you one-on-one, judgment-free, expert advice on how to deal with nearly any financial situation.

What is credit counseling? 

Credit counseling is a service meant to help individuals overcome money and credit challenges and achieve their financial goals. These services can include budget reviews, credit report reviews, foreclosure prevention, student loan counseling and much more. A credit counselor can also enroll you in a debt management plan (DMP).

Common myths about credit counseling

Being misinformed about credit counseling could be holding you back from finding the help you need. Here are the seven most common myths, debunked:

1. Credit counseling will hurt your credit scores

One of the biggest misconceptions about credit counseling is that it will negatively impact your credit scores.

Many people believe, incorrectly, that pulling your credit reports will cause your credit scores to drop. Although a credit counselor may pull your credit reports during an appointment, they only conduct soft credit pulls, which don’t impact your scores at all.

If you enroll in a DMP, however, your scores may initially drop if you have to close one or more of your credit cards. However, you should expect to see your scores increase as you pay off your debt. 

2. Credit counseling is expensive

When you go through a legitimate, nonprofit credit counseling agency like the NFCC, most of the services you receive are free, while a few others are low-cost. In some cases, your credit union, university, employer or military base may cover the fee.

3. Your situation is beyond repair

No matter the situation you’re in, a credit counselor can assess the details and help you determine your next steps. In fact, they may be able to help you prevent things like credit damage, late fees on your debt and even car repossession or home foreclosure. They can also provide unique resources and support you can’t access anywhere else.

Here are some of the things your counselor might do:

• Counsel you on ways to prevent home foreclosure or rental eviction.
• Work with your creditors to stop collection attempts.
• Identify specific ways to improve your credit.
• Counsel you on how to recover from identity theft and credit card fraud.
• Help you consolidate debt payments.
• Provide the counseling required to file bankruptcy
• Refer you to additional services and support in your area.

4. A credit counselor can fix your credit report

Meeting with a credit counselor will not directly impact your credit reports or scores at all, since credit counselors don’t have the ability to change the information in your credit profile. However, credit counselors can review your credit reports with you and give you personalized advice on how to improve your scores.

5. Credit counseling is the same thing as credit repair

They may have similar sounding names, but credit repair and credit counseling couldn’t be more different. The credit repair industry is known for scams and fraud and credit repair companies often charge high fees just to file credit disputes, which is something you can easily do for yourself for free.

By contrast, a credit counselor can teach you how to monitor your credit and make lasting improvements to your reports and scores, all at no charge.

6. Your credit counselor will judge you

The credit counselor’s role is never to judge, lecture or ridicule you. Counselors are trained experts who understand how difficult it is to get financial education, professional support and sound advice.

While discussing your financial situation might feel uncomfortable, a credit counselor’s job is to listen to your concerns, understand your goals and give you confidential, professional support to help you improve your finances.

7. All credit counseling agencies are the same

Unfortunately, some credit counseling services aren’t as trustworthy as others. Even if a counseling agency calls itself nonprofit, for example, they might still charge high fees or pressure you to donate money.

According to the Consumer Financial Protection Bureau (CFPB), a reputable credit counseling organization should offer a range of affordable services from counselors who are accredited or certified.

If you’re ready to talk to an NFCC-Certified Consumer Credit Counselor and discover all the ways they can support you, use our agency finder to and get started right away!