How To Choose A Credit Counselor (And Avoid Getting Ripped Off)

 

choosing a credit counselor

After years of struggling with debt, deciding to pull the trigger and speak to a credit counselor is a very smart move.

But that choice likely comes with a whole new set of decisions and concerns.  What’s the best way to choose an advocate who really will help you bear down and get back on the path to financial security?  How can you be sure that you’ll pick someone legitimate and avoid a costly scam when your finances are already precarious?

In this blog, we’ll take a look at a topic of growing concern for many people as they start to dig themselves out of debt: credit counseling. How can we stay safe and choose a service that will actually help?

Choosing the Right Option
Getting credit counseling is a good decision. You can learn important strategies for managing debt, explore your options for repaying existing loans, and receive confidential advice that’s custom-tailored to your financial situation. Even better, showing proof that you’ve been to credit counseling can help a lender overlook a complicated credit history.

If you’re already under water financially and considering filing for bankruptcy, US Code requires you to meet with a credit counselor to learn all your options first. If things aren’t that bad, but you’re a little behind, a counselor can work with you to establish a repayment plan, lower your bills and stop harassing calls from creditors. Finding a good credit counselor can be like finding a life raft when you’re marooned in the ocean.

Picking a credit counselor, though, is a hard decision. There are many to choose from, and some people masquerade as credit counselors who are really crooks seeking to steal your money or identity. Let’s take a look at a few ways to help sort out the legitimate counselors.

– Remember, just because an organization calls itself “not-for-profit”, it doesn’t mean it provides services for free. Always ask about fees or “contributions” up front. If the credit counselor is defensive or evasive, leave and find someone else. Depending on the specifics of your financial situation, legitimate counselors may charge as much as $50 for an initial consultation and a monthly fee of around $25 for representation with debt collectors.

– Be wary of counseling organizations advertising themselves. Legitimate credit counselors get referrals from lenders, lawyers and charitable organizations. An organization that advertises on television or radio may lack the legitimacy to be involved in that network of referrals.

– Look for a wide range of services. Good credit counseling organizations will offer more than just debt financing packages. They will also offer consumer education, budget assistance, and other educational opportunities. If your credit counselor is pressuring you to sign up for a debt management plan without first reviewing your finances, you should find another counselor.

– Check the United States Trustee Program list of approved credit counseling agencies, which is available here: http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm. This website allows you to find a credit counselor that is approved by the Department of Justice for bankruptcy proceedings. In addition to searching by state, you can also find agencies that work in languages other than English. All of these agencies have been vetted by the Department of Justice and most major lenders acknowledge their legitimacy.

– Call the National Foundation for Credit Counseling at 1-800-388-2227. The NFCC is a nonprofit educational organization that seeks to improve financial literacy across the country. They’re funded by a coalition of creditors and charitable organizations, and they certify their members in financial education and ethical business practices. In many cases, an NFCC member can provide services at low or no cost.

Sources:

http://www.nfcc.org/FirstStep/firststep_01.cfm

http://www.justice.gov/ust/eo/bapcpa/ccde/cc_faqs.htm

http://www.nfcc.org/CreditCounseling/counseling_guidelines.cfm

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