Fiscal Fitness: Choosing a Credit Counselor

Choosing a Credit Counselor

Having trouble developing a budget and sticking to it? If this sounds familiar, you may want to consider visiting an accredited or licensed credit counselor. Credit counseling organizations work with clients to solve financial problems – including developing budgets!
 

Choosing a Credit Counseling Organization

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 any complaints. The United States Trustee Program also keeps a list of credit counseling agencies that have been approved to provide pre-bankruptcy counseling. After you’ve done some research, it’s time for the most important step – interviewing the final candidates.

Here are questions you can ask to help find the best counselor.

• What services do you offer?
  • Look for an organization that offers a range of services, including budget counseling, savings planning and debt management classes. Avoid organizations that push a debt management plan (DMP) as your only option before they’ve spent 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 any set-up fees and/or monthly fees?
  • If there are 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?
• What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, by whom? If not, how are they trained?
  • Try to use an organization whose counselors are trained by a non-affiliated party.
• What assurance do I have that my personal information, including 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 this a red flag and go elsewhere for help.

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.
 

What Can Credit Counselors Help With?

Credit counseling organizations advise clients on managing money and debts, help develop a budget and usually offer free educational materials and workshops. Counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss a client’s overall financial situation and then develop a personalized plan. The initial counseling session typically lasts an hour with an offer of follow-up sessions.

Debt Management Plans

If your financial problems stem from too much debt or an inability to repay debt, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling and DMPs are not for everyone. Consider signing on for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation and has offered customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still will help you create a budget and teach money management skills.