Credit Counseling vs Debt Settlement

Nonprofit credit counseling and for-profit debt settlement are different services with different risks, fees, and effects on accounts.

Credit counseling

A counselor may review a budget and propose a debt-management plan with creditor concessions. Verify accreditation, fees, funding, and which debts are covered.

Debt settlement

Settlement companies may tell consumers to stop paying while funds accumulate, which can add fees, interest, collections, lawsuits, and credit damage.

Red flags

Avoid guarantees, demands for illegal upfront settlement fees, claims that creditors must participate, and advice to hide from creditors.

Compare in writing

Ask for total fees, payment schedule, creditor list, estimated duration, cancellation terms, tax considerations, and what happens if a creditor sues.