credit counseling
A service providing advice and assistance with budgeting, debt management, and financial planning, often required before filing for bankruptcy.
Example
“The nonprofit credit counseling agency helped her create a debt management plan reducing her interest rates from 22% to 8%.”
Memory Tip
CREDIT COUNSELING = professional help managing debt. Often free through nonprofits.
Why It Matters
Credit counseling helps individuals understand their financial situation and develop realistic plans to manage debt before it becomes unmanageable. This service can prevent bankruptcy, improve credit scores, and teach essential money management skills that benefit long-term financial health.
Common Misconception
Many people believe that credit counseling will immediately fix their credit score or eliminate their debt entirely. In reality, counseling is an educational and planning service that requires the individual to follow through with recommended actions, and results take time to materialize.
In Practice
A person with 15,000 dollars in credit card debt across three cards and a struggling monthly budget might work with a credit counselor to create a debt repayment plan, consolidate payments, and adjust spending. The counselor helps them see they can pay off the debt in five years instead of twenty while building an emergency fund of 1,000 dollars simultaneously.
Etymology
CREDIT (financial standing) COUNSELING (guidance, advice). Professional COUNSELING on CREDIT and debt management.
Common Misspellings
Compare debt consolidation options
Related Terms
More in debt
Other debt terms you should know
See Also
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