Credit counseling can be very helpful for some consumers who find themselves in debt trouble. For many consumers, simply having a third party to talk to about their financial issues is a great help, but do keep in mind that there is a difference between credit counseling and credit repair programs. They are not one in the same.

Depending on where you live, finding credit counseling is fairly easy. If you live in a metropolitan area your chances of finding a reliable and knowledgeable credit counselor are better than if you live in a rural area. A good place to start is with local non-profit agencies. Many of these offer free or very low-cost credit counseling services. These types of credit counseling agencies will work with you to help you better understand where you are financially and offer some guidance as to what can be done to improve your situation. In many cases, they offer free educational materials and workshops to help you establish a budget that meets your needs and circumstances.

With this type of counseling, you can begin to take hold of financial situation, learn effective ways to budget your money and reduce spending, and you can also get a clear understanding of how to keep your debt, present and future, within control.

In addition to the above, credit counseling agencies may also be able to help you draft letters to your lenders. Many agencies have pre-drafted letters that they can share with you.

As mentioned above, there are some important and distinct differences between credit counseling and debt repayment plans that are offered by commercial companies. This is especially true in regards to the long-term effects of your credit.

When you take advantage of credit counseling, there is no signed agreement or legal commitment, none of your accounts are affected by the agency itself, and you maintain overall control of how your debts are paid and when they are paid. Credit counseling does not affect your credit rating and does not show up on your credit report. However, because there is no legal or signed commitment, the credit counseling agency leaves the payment of your debts to you, which may leave you exactly where you started if you are not taking some form of constructive action.

With a debt repayment plan, your credit standing may be affected by the plan itself. Some, or all, of your creditors may report that your account is in a debt repayment plan, that some of your payments have been missed, or that there are concessions or other types of financial write-offs that have been made to reduce your current debt to a payable amount. Under the Fair Credit Reporting Act, this information can stay on your credit report for up to seven years.

In many cases, the debt repayment plans require you to deposit money each month with the credit counseling agency. Your deposits are used to pay your creditors according to a payment schedule the counselor develops with you. You may be required to accept certain conditions as well. These might include agreeing to take on no more debt while the plan is in effect.

You will find through your research that some credit counseling agencies charge little or nothing for managing your plan while others will charge a monthly fee. There are a few companies that charge quite a bit in fees. For this reason, it is important that you do your research before you sign up with anyone.