Living paycheck to paycheck? Worried about debt collectors? Can't seem to develop a workable budget, let alone save money for retirement? If this sounds familiar, you may be considering the services of a credit counselor.
Most reputable credit counselors are non-profit and offer services at local offices, online, or on the phone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
But be aware that “non-profit” status doesn’t guarantee that services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which they made hide; others might urge their clients to make "voluntary" contributions that can cause more debt.
Choosing a Credit Counseling Organization
Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. They discuss your entire financial situation with you, and help you develop a personalized plan to deal with your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
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 got a list of counseling agencies you might do business with, check each one out with your
state Attorney General and
local consumer protection agency. They can tell you if consumers have filed complaints about any one of them. (If there are no complaints about them, don't consider it a guarantee that they're legitimate.) The United States Trustee Program also keeps a
list of credit counseling agencies approved to provide pre-bankruptcy counseling. After you've done your background investigation, you will want to interview the final "candidates."
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?
- 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 information about me (including my address, phone number, and financial information) will be kept confidential and secure?
- How are your employees paid? 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.
