Tips for choosing a credit counselor
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 low down 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 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 kinds of fees are charged for any additional
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
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.
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 all accredited agencies with certified counselors.
How much time is the
agency willing to spend with you to discuss your particular 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, an investigative
administrator with Montgomery County Consumer Affairs in Maryland.
"They may have an in-house program that would do a debt reduction."