| Tips for choosing a credit counselor |
| By Lucy Lazarony
• Bankrate.com |
| Not sure how to choose a
credit-counseling agency or debt-management company? These guidelines can help.
Tip No. 1 is to comparison shop. You'll want
to check out services and fees carefully.
"Just like everything else,
shop around," says Travis Plunkett, legislative director at
Consumer Federation of America. "You should be able to get
decent, affordable credit counseling without paying several hundred
dollars a month." Get the lowdown on fees from the get-go.
Avoid companies that charge a large fee and promise to return it
upon completion of a debt-management program.
"Get
the facts," says Edward J. Johnson III, president and CEO of the Better
Business Bureau in Washington, D.C. "Everything should be disclosed upfront.
The costs of service should be straightforward and reasonable." Don't forget
to ask about services beyond a debt-management plan and debt consolidation. Is
a free budgeting session available? What about credit education workshops and
materials? What kinds of fees are charged for any additional counseling services?
"The service should go beyond
consolidation of debt," Johnson says. "Providing budgeting advice and
education is also important."
How is the counseling agency or
company funded? Be aware that not every nonprofit agency has your
best interests at heart. Some nonprofit counseling agencies charge
high fees, and others are run by people looking to line their own
pockets. No matter how the agency is funded, your creditors
should always be credited with 100 percent of the amount you pay
through a credit counseling agency, states the Better Business Bureau.
"Nonprofit doesn't
mean cheap or affordable, or even good," Plunkett says. "We ask people
to delve beneath the surface." Check the reliability and reputation of the
company.
The Better Business Bureau also
recommends that consumers only work with agencies that provide written
agreements of the services to be performed, payment terms including
total cost, how long it will take to achieve results, any guarantees
offered and the counselor's name, business name, address and contact
information.
Contact
the Better Business Bureau to see if the firm has had any consumer complaints.
Check with your state
attorney general's office or other state consumer agencies to find out if
there are any pending legal investigations.
Is the agency accredited through an independent,
third-party association, such as the Council
on Accreditation? Are counselors certified? If not, what kind
of training do they have? Members of the National Foundation for
Credit Counseling and the Association of Independent Consumer Credit
Counseling Agencies are accredited agencies with certified counselors.
How much time is the counselor
willing to spend with you to discuss your particular financial situation?
Will he develop a plan tailored to fit your financial situation?
Don't let anyone pressure you into a quick decision.
"Do they spend a lot of time
with you?" Plunkett asks. "Are they shoving a debt management
plan at you within the first 10 minutes?"
No matter what anyone says, there
are no quick fixes when it comes to credit problems. Be skeptical
of companies that promise otherwise.
"There's
no magic bullet," Johnson says. "There's no quick, easy fix. They're
going to have to be patient." And
you don't need to pay a credit counselor to receive a new payment plan from a
creditor. You could simply call a credit card company and ask for help on your
own. All they can do is say no. "You
can call these banks directly," says Eric Friedman, division chief with Montgomery
County Consumer Affairs in Maryland. "They may have an in-house program that
would do a debt reduction." | 
