10 questions to ask a credit counselor

6. Can you provide references?

Yes, it's good to ask that directly, but you will want to do some checking around on your own as well. Contact the local Better Business Bureau. If possible, get actual references from people who have used the service, keeping in mind that this may be difficult.

The testimonials the company puts on its own Web site from "satisfied customers" probably can't be checked directly, and your friends and business associates may not be as eager to share their experiences with credit counseling as they are to recommend a good Mexican restaurant. Still, any firsthand accounts of good service and reasonable rates should be given a lot of weight.

7. How will this solution affect my credit rating?

One of the main things you're looking for here is a realistic answer. The fact is, if you're late with paying your mortgage or credit card bills, that information probably already has, or soon will, hit your credit reports.

Beware of any company that "guarantees" to wipe your credit clean. Even if they could do that, it wouldn't be legal. Do, however, listen carefully for a commitment to help you manage your credit rating as best you can during this difficult time. Some approaches are better than others as you start paying down your debts, and a good counselor should be able to give you good advice about that without making unsustainable promises.

8. How much will this cost?

The answer to this question should be simple, and the bottom line should be reasonable. If someone starts quoting you a complicated menu of fees and percentages, you've come to the wrong place. If they say they're going to keep your first month's payment as their fee, they are almost certainly a for-profit debt management company.

The cost for an hour of counseling provided by a legitimate nonprofit firm will usually be less than $100, and sometimes even free. If you get a good price (free to low) don't worry about "getting what you pay for," but do ask the next question:

9. Who is helping to pay for this service?

Credit card companies, mortgage banks and other private businesses sometimes provide funding to credit counselors. This is not necessarily a bad thing, but it's good to be aware of it so you're not surprised. The most important thing isn't exactly who pays for the service but whose interests the provider is serving. Naturally, those things are often intertwined -- but not necessarily -- and reputable firms work to keep their advice as independent as possible.

Moore explains that, at Consumer Credit Counseling Service of San Francisco, debt management plans were always a relatively small portion of their business, but until about five years ago, the income from those was a major source of funding for the company. "Creditors used to send back 15 percent of what we sent to them," she says. "But now, they look more generally at the overall quality of what we do. They do audits and then make grants based on the quality of our education and services." This change in the firm's revenue stream, she says, has allowed them to do more actual counseling.

Grants from independent foundations with no vested interests in which debts get paid first are even better. And don't be too suspicious of people who are willing to help pay for the counseling and education of others. If there's one thing we've all gotten clearer on lately, it's that we're in this economy together. If your house goes into foreclosure, the whole neighborhood goes downhill.

10. How do you provide the service?

Good quality counseling is available in person, by telephone and over the Internet. So the important thing is just what works best for you and your learning style.

And then, ask yourself: Is this too good to be true?

If someone promises they can make all your debts disappear while magically improving your credit rating, steer clear. Credit education, counseling and assistance are all worthy services but they're not miracles. If you go in with your eyes open and your expectations realistic, though, you may find that getting some counseling helps you start feeling a lot more hopeful.

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