What Is Credit Counseling? How It Works and What It Costs

Debt can creep up on you. In 2025, more than 8% of families reported being two months or more behind on loan payments, up from 5% in 2022, according to the Federal Reserve.

A credit counselor can help you build a realistic, manageable plan, often for free. At a nonprofit agency, a counselor reviews your income, bills, and debts with you, and may be able to get your card interest rates lowered through a debt management plan.

What is credit counseling?

Credit counseling is a service that reviews your financial situation and works with you to come up with a plan to handle your debt. A credit counselor takes a thorough look at your finances without judgment and discusses potential solutions.

What can a credit counselor do?

A credit counselor provides both education and tools for moving forward. During credit counseling, you may undergo a financial assessment, create a budget and action plan, enter into a debt management plan (DMP), or discuss bankruptcy.

Financial assessment

Your first session usually begins with a financial assessment. The counselor reviews your income, monthly expenses, outstanding debt, and your credit report. This assessment gives you and your counselor a clear, complete picture of your current situation. While it can be scary to see the numbers laid out in black and white, understanding how much you owe and the interest rates on your debt is key.

Pull your reports before your first session. They're free weekly from all three bureaus at AnnualCreditReport.com. If something on them is wrong, like an account you don't recognize or a payment marked late that you made on time, you can dispute it with the bureau for free. Kikoff AI Credit Disputes can help you dispute inaccurate entries.

Budget and action plan

Next, the counselor will help you create a realistic budget. A good credit counselor looks at where your numbers are now and where you want them to go. They work with you to identify areas in your budget you can trim, discuss how to track your spending, and set achievable goals. After your session, you should leave with an action plan for managing your debt with concrete next steps.

Debt management plans (DMPs)

Depending on your situation, you may be a good fit for a DMP. If you enter into a DMP, the counselor works with your creditors to negotiate a repayment plan. The counselor may be able to convince your creditors to waive fees or lower the interest rates on your credit cards.

You make one monthly payment to the agency, and it pays your creditors under the agreed-on repayment plan. Most plans take four to five years, and they require making every payment on time.

Bankruptcy

If repaying your debt isn't realistic, a counselor can walk you through what bankruptcy involves, discuss alternatives, and work with you on a budgeting plan.

The law requires you to complete credit counseling within 180 days before you file through an approved agency. You’ll earn a completion certificate, and after you file, you take a second course, called debtor education, before your debts can be discharged. If you can’t afford the counseling fee, approved agencies must offer it for free or at a lower cost.

Because bankruptcy is a complex legal process that varies by state, including which assets you can keep, talk with a licensed attorney or nonprofit credit counselor to learn how these protections apply where you live.

Read more >> Debt Cancellation: How It Works and What It Costs You

Does credit counseling affect your credit?

Meeting with a credit counselor doesn’t affect your credit on its own. A debt management plan can, mostly because of what happens to your credit cards. The agency generally closes existing cards in the plan, and you may need to agree not to open new credit while on one. Closing accounts lowers your available credit, so the balances you still carry use up a bigger percentage of it. That credit utilization is one of the biggest factors in your score.

But closed accounts don’t take their history with them. If they’re in good standing, they continue adding to the age of your accounts for up to 10 years on your report. As you pay balances down on time, your score can recover.

Read more >> Does Credit Counseling Hurt Your Credit Score?

How much does credit counseling cost?

Many nonprofit agencies price some services on a sliding scale based on your income. In general, initial consultations and budgeting sessions are free. If you decide to enter into a DMP, there is usually a one-time setup fee and an ongoing monthly fee.

Bankruptcy counseling usually has a one-time fee.

We looked up fees published by nine nonprofit credit counseling agencies. Based on our research, these are the typical prices for credit counseling services.

What credit counseling can cost you

Who is a good candidate for credit counseling?

Credit counseling tends to be most effective for people who have a steady income but who are struggling to keep up with their debt payments. If you’re overwhelmed by multiple credit card bills or your minimums don’t leave much for essentials, credit counseling can give you a clear, honest review of your situation.

A DMP can be a useful tool if you need structured assistance with your debt. It provides accountability and one simple payment, so it can be easier to stay on track. A counselor can also help you if your debt payments are more than your income can cover. The counselor will talk with you about all of your options, including bankruptcy.

If your debt is relatively low and you’re still able to afford your payments, you may be able to skip credit counseling and manage your debt yourself. Creating a budget and sticking to a debt repayment plan like the debt avalanche or debt snowball methods can help you pay off your balances and save money on your own.

Read more >> How to Negotiate Credit Card Debt

How to find a reputable credit counselor

To find a reputable credit counselor, follow these steps:

1. Start with a nonprofit. Most credit counseling agencies are nonprofits, but you’ll still want to check them out with your state attorney general and local consumer protection office.
2. Look for NFCC or FCAA membership. Both the National Foundation for Credit Counseling and the Financial Counseling Association of America require member agencies to be accredited by a third-party organization and their counselors to be certified.
3. Ask about fees. Ask for a written quote of every one-time and monthly fee, when each is due, and whether the agency lowers or waives fees based on income.

‍Where to get help

• Free or low-cost credit counseling: The National Foundation for Credit Counseling (NFCC) connects you with a certified counselor at 800-388-2227. The Financial Counseling Association of America also lists member agencies.

• Bankruptcy counseling: Use the U.S. Trustee Program's list of approved agencies, searchable by state and judicial district.

• Free legal help: LawHelp.org lists free legal aid programs by state. You can also find a local legal aid office through the Legal Services Corporation.

• Problems with an agency: Submit a complaint to the Consumer Financial Protection Bureau online or at 855-411-2372.

Bottom line

Credit counseling costs little or nothing to try, and one session can tell you whether a debt management plan, a payoff plan of your own, or a conversation with a bankruptcy attorney fits your numbers.

If you go with a DMP, your score may dip when the cards in the plan close. What brings it back is the share of your available credit you’re using, which falls as the plan pays your balances down. Kikoff Credit Monitoring tracks that number for you, so you can see the plan working.