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8 steps to picking a credit counselor

Summary

Credit counseling agencies can help you get out of debt. Learn how to select the right one for your debt issues

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By Jeremy M. Simon

Credit card tips mentioned in this article

  1. Make sure agency is a member of a national group and has met state requirements
  2. Check local record.
  3. Find out where payments go and what added fees may apply.
  4. Get agreements in writing, and beware of big promises.
  5. Make sure individual counselor is certified.
  6. Learn if agency can work with all creditors.
  7. Make sure info and money provided are protected.
  8. Be sure the agency offers a range of services.

Consumers with bad credit may have trouble fixing their debt problems on their own. Luckily, credit counseling is available across the country to help people confront their bad credit.

But not all credit counseling agencies are the same. In fact, some members of the credit counseling industry generate profits for affiliates through their nonprofit counseling. To find reputable credit counseling agencies, consumers can take the following steps:

    1. Make sure the credit counseling agency is a member of a national organization such as the National Federation for Credit Counseling or the Financial Counseling Association of America and has fulfilled state requirements for credit counseling.
    2. Even if an agency is accredited, check its local record with the Better Business Bureau, state attorney general and local consumer protection groups that examine consumer complaints. A history of complaints should raise a red flag.
    3. Find out about where payments go and any additional fees that are charged. All payments sent to the credit counseling agency as part of a debt management plan should be passed on to your creditors in a timely manner. Make sure any costs do not undermine efforts to pay down debt, or if fees can be reduced or waived for those who cannot pay.
    4. Get verbal agreements in writing, and beware of big promises. Statements from any credit counselor that suggest it can lower monthly payments by up to 50 percent, get you our of debt easily and quickly or can remove negative (but accurate) information from your credit report should cause consumers with bad credit to look elsewhere for help.
    5. Find out about the credit counselor and if he or she is certified by an outside organization. The counselor should take enough time to understand the consumer’s personal circumstances and be able to create a plan for their individual needs, rather than issuing a blanket recommendation for a debt management plan.
    6. Learn if the credit counseling agency can work with all creditors, since some agencies may be unwilling to work with creditors that do not provide some type of financial support to the agency. While an agency cannot require creditors to recognize a debt management program, the agency should at least contact all creditors.
RELATED VIDEO
How to find a good credit counselor

Picking a credit counselor:
Columnist Erica Sandberg discusses what to look for in a good credit counseling agency.

  1. Get assurance that money and information provided to the agency are protected. Ask for evidence that the agency is bonded or has insurance to protect consumers’ money if the agency has financial problems. Get sufficient evidence that all personal information is kept confidential.
  2. Select a credit counseling agency that offers a range of services, including counseling and education. Find out the costs for these opportunities and how they are made available.

Credit counseling offers a helping hand to those who wish to overcome debt and repair bad credit. It just pays to be careful when making a selection.

Credit Card Rate Report Updated: September 18th, 2019
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