Do you feel overwhelmed by your debt situation? Plenty of organizations exist to help those who don't know how to handle their credit, feel confused about where to start repaying their debt, or don't understand what steps they need to take to become financially secure.
This post originally appeared on ReadyForZero.
Unfortunately, not all credit counselors act in your best interest. It can be difficult to sift through information provided by companies promising to help consumers. What should you look for when choosing a counselor? And how can you tell if an organization exists to help others, not themselves?
If you need help managing and reducing your debt, our comprehensive guide on how to choose a legitimate credit counselor is a good place to start.
What is Credit Counseling?
When you enter a consumer credit counseling program, you receive information and education about managing your debt effectively and creating actionable plans to repay your balances. A credit counselor can help you maintain a reasonable budget and may help you establish a debt management plan.
Credit counseling isn't a quick fix to a debt problem. Instead, it's a process you undergo to rebuild your credit and improve your financial standing.
What a Reputable Organization Looks Like
Knowing what to look for in a reputable organization will help you spot those that are anything but — and can help you avoid falling victim to a scam.
Most legitimate credit counselors are nonprofit organizations. A reputable credit counselor should be certified and will provide you with confidential, non-judgmental counseling sessions and readily-available educational materials.
Agencies should be happy to give you free information on how they operate, what they do for consumers, and how they help people get their finances back on track. You should not have to provide details of your financial situation for a credit counseling company to send details of how their programs work and how they educate people on credit, debt, and money management.
Many legitimate companies also offer their initial consulting session with you free of charge. Don't hesitate to ask how they do charge for services or how they earn money to operate. Walk away from companies that encourage you to leave a "voluntary" contribution in exchange for their services.
Again, the company should be a registered nonprofit. But they should also hold memberships with the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA). Both organizations hold credit counseling companies to high standards of ethical behavior when working with consumers.
Additionally, the company should be accredited by a third party like the Council on Accreditation (COA).
You can also turn to your state's local consumer protection agency or the Better Business Bureau to vet companies you might want to work with. If other consumers made complaints against a company in the past, the protection agency will have those on file.
What to Expect from a Credit Counseling Program
Most programs follow a process with three major steps.
- First, a counselor will sit down with you for a comprehensive session. They'll want to establish the big-picture view of your finances, determine how deeply in debt you may be, and decide whether or not your situation is appropriate for a credit counseling program.
- Next, the counselor will help you develop a plan for repaying your debt. They can assist you in reaching out to creditors to establish a repayment plan that you can handle as you work to get out of debt.
- Finally, any legitimate credit counseling program will provide you with financial education. A legitimate credit counselor wants to give you the tools you need to stay financially secure once they help you get there — and arming you with the right knowledge puts you on the path toward maintaining financial freedom.
Questions to Ask Before Choosing a Credit Counselor
If you believe you've found the credit counselor you'd like to work with, take the time to ask these important questions before scheduling a meeting:
What services do you offer consumers? You want to look for an organization that offers many services for those they aim to help. Although a debt management plan may be one of their services, it shouldn't be the only one available. (Not every consumer will need this level of assistance.)
Can you send me some educational materials? Legitimate credit counselors will be happy to provide you with resources for financial education — at no cost to you.
What fees will I be expected to pay? Again, don't hesitate to inquire about costs and fees. If you cannot afford fees, reputable organizations should waive the cost. Get quotes or prices in writing before working with any company.
Are you accredited? Are your counselors certified? Reputable companies will be recognized by organizations like the NFCC and AICCCA — and their counselors should be certified, too.
Do you keep information confidential? The credit counseling organization should be able to explain how they keep consumer information private and secure.
Above all, remember that legitimate companies should always be happy to answer your questions and help you understand the services they offer.
Photos by Images Money, Marco Arment, CollegeDegrees360, reynermedia and Derek Bridges.
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