Are you barely making ends meet? Dodging debt collection calls? Unable to meet your monthly expenses much less save money for emergencies or retirement? If this sounds familiar, you may want to consider credit counseling. Many credit counseling agencies are nonprofit, and will work with you to find the best solution to your financial problems. But beware — just because a credit counseling agency says it is “nonprofit” doesn’t guarantee that its services are free, or even affordable, or that its services are legitimate.
Choosing a Credit Counseling Agency
Reputable credit counseling agencies advise you on how to realistically manage your money and your debts, help you develop a workable budget, and usually offer free educational materials and workshops.
Credit counselors should be certified and trained in the areas of consumer credit, money and debt management, and budgeting, and should discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems without pushing a debt management program. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.A reputable credit counseling agency should also provide you with free information about itself and the services it provides, without requiring you to provide any details about your situation. Once you’ve developed a list of potential counseling agencies, check them out with the Better Business Bureau to see if they have a satisfactory record, how many complaints (if any) have been filed again the credit counseling agency, and for what reasons. The United States Trustee Program also keeps a list of credit counseling agencies that have been approved to provide pre-bankruptcy counseling.
Questions to Ask a Credit Counseling Agency
Here are some questions to ask to help you find the best credit counseling agency for you.
- What services do you offer? – Look for a credit counseling agency that offers a variety of related services, including budget counseling, and savings and debt management classes. Avoid agencies that push a debt management plan (DMP) as your only option before they spend a significant amount of time analyzing your financial situation.
- What educational materials/information do you offer? Is it free? Avoid credit counseling agencies that charge for educational materials or other written information.
- What are your fees? Are there set-up and/or monthly fees, how are they broken down? Get a specific price quote in writing and make sure you understand exactly what fees you’ll be charged, and what services you’ll receive for each fee.
- What if I can’t afford to pay your fees or make contributions? Under the terms of the Pension Protection Act of 2006, non-profit credit counseling agencies must provide services for free if a consumer is unable to pay. If a for-profit credit counseling agency is unwilling to work with you, look for a non-profit agency.
- Will I have a formal written agreement or contract with you? Make sure you get a written agreement which sets for any promises that have been made, and the fees you will be charged. Don’t sign anything without reading it first.
- Are you licensed to offer your services in my state? Many states require credit counseling agencies to be licensed in each state, so make sure any agency you do business with is licensed (if necessary) and is able to do business in your 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 and who have a background in debt management, consumer credit and budgeting/finance.
- Do your employees work on commission? If employees earn a commission for signing you up for certain services, making a contribution, or enrolling you in a debt management plan, you should steer clear.
Debt Management Plans
If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may, after spending time thoroughly reviewing your financial situation, recommend that you enroll in a debt management plan. A DMP alone is not credit counseling, and DMPs are not the right choice for everyone. Even if a DMP is appropriate for you, a reputable credit counseling organization still will help you create a budget and teach you money management skills.