Get access

The Impact of Credit Counseling on Subsequent Borrower Behavior


  • We gratefully acknowledge Trans Union LLC for providing the credit report data at the core of this empirical study. We also thank Celia Diehl, Bob Runke, and the National Foundation for Credit Counseling for guidance and comments throughout the project. Comments from participants at the Federal Reserve System’s 3rd Community Affairs Research Conference were particularly helpful.


The study examined the impact of individualized credit counseling delivered to nearly 8,000 consumer clients during 1997. Credit bureau data provided objective measures of credit performance at a variety of margins between 1997 and 2000 for counseled clients, relative to a comparison group of uncounseled borrowers. Receipt of counseling was associated with a positive change in borrower credit profiles. Techniques to control for self-selection into counseling reveal that much of the improvement was attributable to characteristics unique to consumers who sought counseling. But counseling itself was associated with substantial reductions in debt and account usage, and appeared to provide the greatest benefit to those borrowers who had the least ability to handle credit prior to counseling.