 Get
thee to a credit counseling agency -- now!
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 Dear
Debt Adviser,
I am a 26-year-old government employee with a young child and about
$16,000 in debt! This whole amount stems from credit cards and about
three of the cards have fallen into collections. My credit is terrible
and I currently rent an apartment, which eliminates all possibilities
of getting a loan of any kind to correct this. I would like to work
with a credit consumer counseling service but don't have the money
to get started. What should I do?
-- Scott
 Dear
Scott,
You are the consumer that the traditional consumer
credit counseling industry was created to serve. There is an agency
out there willing to help you with this debt, and your lack of funds
to "get started" should not be an issue. Fees are low
and can be waived. Most candidates for counseling have no free cash
flow. The agency will help you reorder your spending to free up
the needed payment. For your part, you just need to be willing to
make changes and stick with the plan.
Credit counseling has been around since the 1960s.
With the new bankruptcy law, which went into effect in October of
2005, credit counseling became a requirement for filers and, as
such, has received a great deal of media hype, both accurate and
not, positive and negative. An entire chapter of my book, "Credit
Repair Kit For Dummies," deals with finding the right agency
for you. Another chapter deals with collectors. Here's the short
course on those credit counselors:
I recommend you look for a nonprofit agency. They
help people as part of a mission in life, not to make money as by
definition a for-profit does. A good starting place is the National
Foundation for Credit Counseling or the Association
of Independent Consumer Credit Counseling Agencies. Look for
the following as you search:
- Accreditation. A current
accreditation by the Council on Accreditation, or COA, or the
International Standards Organization, or ISO, is a good place
to start. Not all nonprofits have accreditation, and that doesn't
necessarily mean they are bad, but this is a gold standard that
stands up well.
- Fees. The best agencies
don't charge a fee for counseling. A fee is a barrier to your
getting the help you need. Those who do charge one should be keeping
it very low and be willing to waive it if you can't afford to
pay. If you end up working with an agency long term, chances are
you will have to pay a low one-time setup fee and a monthly fee.
If these fees don't fit into your budget, they should be waived.
- Reputation. One of
the biggest ways agencies get clients is through referrals from
past customers. It might be embarrassing, but if you ask a friend,
relative or co-worker for advice on who to see for budgeting assistance
(no need to mention the debts), you will be surprised at how many
have an agency they can recommend from experience.
- Counselor certification.
An independent third-party certification shows an organization's
commitment to quality standards.
- Length of counseling session.
If you are told this takes 10 to 20 minutes, move on to
the next agency on your list. Usually 45 minutes to an hour (or
more) is needed to look at all the issues and customize a solution.
Getting
help by telephone or in person is your choice. A recent study
about to be released by Georgetown University found that there
is no difference in quality or outcome between counseling delivered
by phone or in person. The Internet is also available if you are
more comfortable receiving counseling that way. Just beware of
phishing,
and know who you are dealing with.
- Educational services offered.
Ask if the agency offers community programs in budgeting, financial
goal setting and housing issues. This is a sign they are committed
to making this a permanent change for you and not just a quick
fix.
The right agency is out there to help you. Good
luck!
The Debt Adviser, Steve Bucci, is the president
of Money Management International Financial Education Foundation
and the author of Credit
Repair Kit for Dummies. Visit MMI
for additional debt advice or to ask a question of the Debt Adviser
go to the "Ask the
Experts" page to ask a debt question.
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