What is the National Foundation for Credit Counseling?

The National Foundation for Credit Counseling (NFCC) is an American institution that aimed to provide licensing, accreditation and assistance to debt or credit counselors. It was funded primarily by lending (credit card) agencies. In the wake of much higher credit spending in the 1970s and 1980s (which continues today) the NFCC helped point people in the direction of debt counselors. These counselors worked for nonprofit agencies, and would help borrowers consolidate their debts, especially if they owed to multiple credit cards, lowering or suspending further interest, and helping borrowers make a single payment each month, which would be disbursed among their creditors.

The companies most associated with the NFCC were called Consumer Credit Counseling Services. In the 1990s, huge numbers of agencies unaffiliated with the NFCC began to crop up. The worst of these charged huge fees for consumers attempting to repay their bills, and the IRS, eventually caught up with some of these agencies, revoking their nonprofit status. Though there are some rival credit counseling agencies that are very reputable, affiliation with the National Foundation for Credit Counseling tends to give the consumer some assurance that most of the money they spend in payments will be directed toward paying off their debt, not paying the salary of a debt counselor.

Since the National Foundation for Credit Counseling, and its affiliate credit counseling agencies are mainly funded by larger lenders, some criticize it as simply an offshoot of the credit industry, and not truly interested in helping out consumers. There’s some question as to how much negotiation occurs in terms of lowering interests or payments if a company survives based on return of a portion of that payment from lenders. While this criticism may be occasionally just, even more so if the agency is not nonprofit, many people have been aided by affiliates of the National Foundation for Credit Counseling, and have been able to avoid bankruptcy, which tends to mar credit rating for much longer.

There’s significant dispute about how much working with a NFCC affiliate to resolve debt will damage credit standing. Technically it is not supposed to lower credit score and some lenders, banks, or landlords may view successful repayment of debt through a debt-counseling agency as a positive effort on behalf of the borrower. However, this is not always the case.

Working with a National Foundation for Credit Counseling affiliate, or any debt counselor does show up on your credit report and it may make some people feel you are a poor risk when it comes to trying to rent a house, purchase a house, or obtain a loan to buy a car. You’re not likely to have use of your credit cards anymore, and those offered to you if you're in an NFFC credit counselor’s program may have extremely high yearly and set up fees, and very high interest.

If you are considering credit counseling, using an affiliate of the NFCC guarantees a few things. The organization you are working with will be nonprofit. This means it may be limited as to the fees it can charge you to help you repay your debt. If you work with a non-NFCC affiliate, look for a nonprofit agency and find out exactly how much of your monthly payment will go toward repaying your debt. Evaluate a couple of debt counseling agencies to find the best deal, the one that offers you the shortest length of debt repayment time, and also look for a reputable agency that has been in business for a while. It’s not recommended that you use a for profit credit counselor, since you are likely to pay much higher fees and it may take you much longer to finish paying down your debt.

No debt counselor is a miracle worker. Even a National Foundation for Credit Counseling affiliate company will require that you have sufficient funds to make your minimum monthly payment. About half the people that work with affiliates are unable to pay off their debt, often because the monthly payment is higher than is affordable. When this is the case, bankruptcy is often your only resource. Though it may damage your credit rating, it may be worthwhile to be free from most debt, especially if your income has dropped below a level where you can afford to keep paying for such debts.