By Mary Hunt

If there’s one thing that makes many people go hmmmm, it’s the topic of credit counseling. Many people still confuse credit counseling — paying back all of what a borrower owes — with debt settlement and negotiating payoffs of 50 percent or less of what the borrower owes. Others assume incorrectly that credit counseling is the same as debt consolidation.

Credit counseling is educating consumers on how to avoid incurring debts that cannot be repaid, and creating an effective debt management plan and budget. Credit counselors are often able to negotiate lower interest rates and a more favorable payback schedule.

Here’s when a credit counselor’s debt-management program may help you:

1. Your unsecured debt is mostly on credit cards. Debt-management plans typically can’t deal directly with overwhelming medical bills, student loans or other similar debts.

2. You are ready to get on a strict budget. A debt-management plan requires you to turn over a certain dollar amount each month to the credit counselor, who distributes the money to your creditors.

3. You are determined to avoid bankruptcy. Credit counseling is designed to help you avoid bankruptcy or debt settlement.

4. You’re not already in too deep. Unfortunately, people wait too long to seek aid. If you have enough income to pay the minimums on your bills and a little bit extra, you’ll have the best shot at success with credit counseling.

For most of credit counseling’s history, the industry has been dominated by the National Foundation for Credit Counseling, whose nonprofit affiliates known mostly as Consumer Credit Counseling Services offer lower interest rates and payment plans for people who have fallen behind.

NFCC, offering credit counseling and financial rehabilitation since 1951, has become the gold standard in credit counseling.

Recently, I spoke with Gail Cunningham of NFCC and asked her about NFCC’s success rate. “In 2011, of the 2.5 million people NFCC counseled, one-third required only a number of counseling sessions to get them back on track,” says Gail. “Another one-third of that group required professional intervention by means of our debt-management program.” The final one-third were found to be better served by someone else.

About 53 percent of those who come to NFCC seeking help go on to a successful completion, which means unsecured debt is 100 percent paid off and they’re back on their feet financially.

What happens to your credit during counseling largely depends on how your lenders report your account to the credit bureaus. Some creditors report customers as delinquent on their bills until they make three consecutive payments of the negotiated new minimums. Being reported as late or delinquent can certainly hurt your credit scores, but a simple notation about credit counseling probably won’t.

To be connected with a credit counselor that is certified by NFCC, go to and look for “Click Here to Begin.” Or call 800-388-2227 to be connected to the counselor closest to you.

Mary Hunt is the founder of, a personal finance member website. You can email her at, or write to Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at