Budget Guidelines for Credit Counseling

Bad budgeting often leads to credit problems that may require outside assistance. Credit counseling companies offer helpful services, from retooling budgets and teaching financial management skills to preparing and administering formal debt repayment plans, according to the Federal Trade Commission website. You can get your budget back on track and bring your debt under control with a legitimate credit counselor's help.

Self-Help

Good credit counseling firms do not just focus on structured debt management plans. The FTC explains that they offer tools you can use for self-help. For example, a counselor will go over your finances with you and discuss guidelines for making a new budget aimed at making on-time payments and reducing your debt steadily. Services are usually offering on-site at an office, on the phone or over the Internet. You can also attend financial management seminars through many counseling firms.

Formal Budget Plans

You may not be able to set up or follow budget guidelines on your own if your finances are in very bad shape. A credit counselor can set up a formal debt management plan for you, if necessary, and handle monthly administration. The FTC explains that good DMPs focus on getting you debt-free within about five years. The counselor works with you to determine your fixed monthly expenses and talks to your creditors, sometimes getting concessions on interest rates and fees. You determine a workable budget with the counselor and send a monthly payment amount to the counseling firm, which pays your individual bills out of that larger payment.

Bankruptcy

Sometimes your financial condition is so poor that bankruptcy is the best option. A credit counselor can help you determine whether a budget will help you or whether you need court assistance to get back on track. Federal law requires you to go through pre- and post-bankruptcy budget counseling with approved providers, according to the FTC. The sessions cover other options and teach you guidelines for proper budgeting once your case is discharged to prevent future problems.

Considerations

Not all credit counseling companies are legitimate, even if they advertise not-for-profit status. The Better Business Bureau advises choosing a counselor carefully by looking for a licensed firm with personnel trained and certified by an outside organization. Ask if the firm is a member of the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies, two professional groups that promote ethical practices. Both of these organizations offer referrals to counselors.