How Consumer Credit Counseling Works

Personal debt is reaching record highs, and personal savings is reaching all-time lows. Yet consumer spending accounts for two-thirds of the $11 trillion U.S. economy. Consumer credit counseling can help people find relief. See more debt pictures.
© iStockphoto/christine balderas

Your phone rings off the hook -- but unfortunately, it is not your friends wanting to go out or your family asking how you are doing. Instead, your phone line is tied up by creditors and credit agencies demanding their money.

Money may be the last thing you want to think about -- but avoiding the issue could mean falling deeper into debt. Fortunately, there are options for reducing and managing your debt, and one of these is consumer credit counseling.

Consumer credit counseling helps to rebuild and reestablish your credit by creating a debt repayment plan that you can afford. It is not a quick fix, and it will not give you perfect credit instantly, but it can go a long way in repairing your credit and giving you financial freedom.

Credit counseling agencies usually work on a three-part program:

  • First, they will assess your current financial conditions to see how badly you are in debt. Not all situations will best benefit from a consumer credit counseling service.
  • If your situation is applicable for consumer credit counseling, the agency will help establish a restructuring and repayment of your debt to the credit card companies.
  • The counselor will give you credit education [source: CreditPage]. This may be the most important step, because learning about credit and finances will help you keep your newfound financial freedom for the rest of your life.

Read on to find out how consumer credit counselors will assist you using their three-step plan.