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Choosing a Credit Counseling Service
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Credit counseling - They do not have all the answers
Are "They" Right? I had heard (one of those things that "they" say) that checking your own credit report lowers your credit score. Is that true and will the score be hit three times if ordering all three free reports? I appreciate your time. -- Sincerely, David
Hi, David. As is often the case, "they" aren't quite right about the impact on your credit score when checking your own file. ... Read credit counseling article
Build Credit With Good Money Management Skills
You should consider how to build credit using good money management skills today. Your first step is to keep a record of outgoings and use a strict budget that you can stick to. Bankruptcy and debt consolidation may add more costs to an already bad situation. You will have to deal with more expenses, high interest and repayments that may not be enough to satisfy your creditors. This can be stressf... Read credit counseling article
Choosing a Credit Counseling Service
Are you way over your head in debt? For many struggling to pay off their debts, self-help sometimes is not a viable option. Here are some pointers for choosing the best credit counseling service.
Our motto at Credit Shack is that self-help is almost always the best path to getting out of debt. Self-help works because out-of-control spending ranks as the most common culprit for debt. Stop the spending, and you stop building debt. Stop building debt, and you're on the way to recovery. Sounds easy? Sometimes it isn't. You see, it's learning to say "No" to the call of plastic that stops most people. Things get particularly dicey in family situations where couples have totally opposite ideas of how to manage the finances. Sometimes it's necessary to seek personal debt assistance. Unfortunately, finding a good credit counseling service can be difficult.
When should I consider credit counseling?
We champion self-help debt payoff methods because they're free. In most cases, we believe commercial credit counseling services can and should be avoided. When you're trying to crawl out from under a mount of debt, the last thing you need is an expensive credit counseling service piling on more bills! Since when does going deeper into debt to get out of debt make any sense?
Self-help isn't for everyone. You should consider a credit counseling service if you can't resolve your debt problems yourself. For example, consider credit counseling if you or your spouse has a psychological compulsion - an addiction - to shopping & spending that you cannot resolve on your own. Getting out of debt requires both patience and determination - qualities not everyone enjoy. You should also consider a credit counseling service if you are unable to meet your monthly minimum payment obligations. It's one thing to try getting out of debt yourself if finances are tight; but if you can't pay the bills, you should consider credit counseling.
What do credit counselors do?
Exact counseling techniques vary. In general, credit counselors work with you to establish a budget. They negotiate mutually agreeable repayment arrangements with you and your creditors. Often credit counseling services offer to collect your payment and forward it to your creditors as part of a debt management plan. Most importantly, credit counseling services provide education to help you avoid falling into the debt trap again farther down the road.
What are some principles for choosing a credit counseling service?
Fraud and corruption run rampant in the credit industry, particularly in credit counseling and credit repair services. To make matters worse, a November 2003 Consumer Federation of America study shows that Americans are largely uneducated about credit counseling services. Low income individuals - presumably the most in need of credit counseling - demonstrated the least amount of knowledge about credit counseling. Low levels of education make it easier to be taken advantage of. Legitimate and beneficial credit counseling services indeed exist. However, finding them sometimes feels like searching for a needle in a haystack.
Find a local credit counselor. There are numerous non-profit organizations in every state that counsel consumers in debt at low or no cost to you. You are less likely to encounter fraud when you use a local, brick-and-mortar credit counseling organization. Local credit counseling carries that added advantage of personalized, face-to-face attention - a benefit Internet and telephone counseling services cannot provide.
Choose a non-profit counseling service. When searching for a credit counselor, you're safest limiting your search to non-profit organizations. By narrowing your search to non-profits, you improve your chances of selecting a reputable credit counselor. However, selecting a credit counselor with non-profit status certainly does not prevent fraud. For example, the FTC filed a complaint in November 2003 against AmeriDebt, a Maryland-based non-profit credit counseling group. The claim alleged that AmeriDebt claimed to be a non-profit and marketed its services to consumers as "free," although they retained the entire first debt repayment check (which was supposed to go to creditors) as a "contribution" to their organization.
Get specifics. Pay close attention to fees. Make sure that you understand the cost of the service, if any, upfront. Make sure you understand what the fees are for, so you don't end up in a situation like the clients of AmeriDebt. Make sure that your creditors are willing to deal with the credit counseling service you choose. Creditors are only required to deal with you, not third-party counseling services. Finally, make sure that the counseling service you choose offers real education. Be wary if they simply try to enroll you in a debt management plan where they handle your money and forward payments.
Get references. Get input from others before selecting a counseling service. Search the Internet for reviews; ask friends who have had credit counseling for their advice; check with your local Better Business Bureau. Use your common sense.
Remember, credit counseling takes up the slack when self-help fails. If you're considering a credit counseling service that doesn't do anything you can't already do on your own, keep looking. There's no reason to pay someone to do a job you can do better yourself.
Wrapping up
To recap, here are the main points from this article:
Self-help is usually best. Credit counseling services often cost money that you could be using to directly pay down your debts.
If self-help isn't working, consider credit counseling.
Credit counselors help you budget and often will help you negotiate a repayment plan with your creditors.
Avoid fraudulent counseling services by educating yourself, shopping locally, limiting your search to non-profits, getting specifics on their duties, and checking references.
Credit counseling is only worthwhile when assists you in a way that self-help cannot.
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Choosing a credit counselor - counseling Organization
Living paycheck to paycheck? Worried about debt collectors? Can't seem to develop a workable budget, let alone save money for retirement? If this sounds familiar, you may want to consider the services of a credit counselor. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But beware - just because an organization says it is "nonprofit" doesn't guarantee that its services are free or affordable, or that its services are legitimate. In fact, some credit counseling organizations charge high fees, some of which may be hidden, or urge consumers to make "voluntary" contributions that cause them to fall deeper into debt.
Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
Choosing a Credit Counseling Organization
Reputable credit counseling organizations advise you on managing your money and debts, help you develop a budget, and usually offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
A reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If a firm doesn't do that, consider it a red flag and go elsewhere for help.
Once you've developed a list of potential counseling agencies, check them out with your state Attorney General, local consumer protection agency, and Better Business Bureau. They can tell you if consumers have filed complaints about them. (If they don't have complaints about them, it's not a guarantee that they're legitimate.) Then, it's time for you to interview the final "candidates."
Questions to Ask
Here are some questions to ask to help you find the best counselor for you.
What services do you offer?
Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan (DMP) as your only option before they spend a significant amount of time analyzing your financial situation.
Do you offer information? Are educational materials available for free?
Avoid organizations that charge for information.
In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
What are your fees? Are there set-up and/or monthly fees?
Get a specific price quote in writing.
What if I can't afford to pay your fees or make contributions?
If an organization won't help you because you can't afford to pay, look elsewhere for help.
Will I have a formal written agreement or contract with you?
Don't sign anything without reading it first. Make sure all verbal promises are in writing.
Are you licensed to offer your services in my state?
What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, by whom? If not, how are they trained? Try to use an organization whose counselors are trained by a non-affiliated party.
What assurance do I have that information about me (including my address, phone number, and financial information) will be kept confidential and secure?
How are your employees compensated? Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization? If the answer is yes, consider it a red flag and go elsewhere for help.
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Choosing a Credit Counseling Service
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