Tips for choosing a credit counselor
sure how to choose a credit-counseling agency or debt-management company? These
guidelines from Bankrate.com 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 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.
"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.
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
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."
-- Posted: Jan. 6, 2003