Choosing a Credit Counselor
For some, spending is as hard to quit as alcohol, drugs or
gambling. For others, circumstances beyond their control —
medical conditions, job loss or divorce — helped dig them
deep into debt. Whatever your situation, it never hurts to
get professional help. Talk with a credit counselor
privately to see whether a debt repayment program may be right
for you.
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Many credit counseling companies are nonprofit and work
with you to solve your financial problems. But beware — just
because a company says it is "nonprofit" doesn't
guarantee that its services are free or affordable, or that
its services are legitimate. In fact, some credit counseling
companies charge high fees, some of which may be hidden, or
urge consumers to make "voluntary" contributions
that cause them to fall deeper into debt.
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Most credit counselors offer services through local offices,
the Internet, or on the telephone. Many universities, military
bases, credit unions, and housing authorities operate nonprofit
credit counseling programs. Your financial institution, local
consumer protection agency, and friends and family also may
be good sources of information and referrals.
Reputable credit counseling companies advise you on managing
your money and debts, help you develop a budget, and usually
offer free educational materials and workshops. Their counselors
are certified and trained in the areas of consumer credit,
money and debt management, and budgeting. Counselors discuss
your entire financial situation with you, and help you develop
a personalized plan to solve your money problems. An initial
counseling session typically lasts an hour, with an offer
of follow-up sessions.
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A reputable credit counseling agency should send you free
information about itself and the services it provides without
requiring you to provide any details about your situation.
If a firm doesn't do that, consider it a red flag and go elsewhere
for help.
Once you've developed a list of potential counseling agencies,
check them out with your state Attorney General, local consumer
protection agency, and Better Business Bureau. They can tell
you if consumers have filed complaints about them. (If they
don't have complaints about them, it's not a guarantee that
they're legitimate.) Then, it's time for you to interview
the final "candidates."
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Questions to Ask
Here are some questions to ask to help you find the best counselor
for you.
What services do you offer?
Look for an organization that offers a range of services,
including budget counseling, and savings and debt management
classes. Avoid organizations that push a debt management
plan (DMP) as your only option before they spend a significant
amount of time analyzing your financial situation.
Do you offer information? Are educational materials
available for free?
Avoid organizations that charge for
information.
In addition to helping me solve my immediate problem,
will you help me develop a plan for avoiding problems in
the future?
What are your fees? Are there set-up and/or monthly
fees?
Get a specific price quote in writing.
What if I can't afford to pay your fees or make contributions?
If an organization won't help you because you can't afford
to pay, look elsewhere for help.
Will I have a formal written agreement or contract with
you?
Don't sign anything without reading it first. Make sure
all verbal promises are in writing.
Are you licensed to offer your services in my state?
Is the agency accredited through an independent, third-party
association such as the Council on Accreditation? Are counselors
certified? If not, what kind of training do they have?
Members
of the National Foundation for Credit Counseling and the
Association of Independent Consumer Credit Counseling Agencies
are all accredited agencies with certified counselors.
What assurance do I have that information about me (including
my address, phone number, and financial information) will
be kept confidential and secure?
How are your employees compensated? Are they paid more
if I sign up for certain services, if I pay a fee, or if
I make a contribution to your organization?
If the answer is yes, consider it a red flag and go elsewhere
for help.
And you don't need to pay a credit counselor to receive a
new payment plan from a creditor. You could simply call a
credit card company and ask for help on your own. All they
can do is say no.
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