Credit Counseling Agency Cautions

Using a reputable credit counseling organization can help some consumers get back on track with their financial obligations and help manage their budget better.  Better financial management of existing debts will certainly help improve an individual’s credit history and credit score.  But, credit counseling services are often not the solution they are advertised to be.

Credit counselors should provide advice to consumers regarding managing money and debts, help develop a workable budget, and offer various educational materials to help the consumer gain control of their finances.  Credit counselors can help develop a personalized plan to solve that helps to solve a variety of money problems.  Unfortunately, too many credit counselors charge a fee and provide very little substantive assistance to consumers that need financial help.

To avoid working with a credit counseling organization that provides little assistance, there are some questions you should ask before choosing a credit counselor.

Ask that the credit counseling organization to send or provide material regarding their services in advance.  Find out if they offer any educational materials for free.  Do not provide account numbers and personal finance information other than your name and address before any counseling agency will agree to send you information about their services.  Avoid organizations that charge for information.

What kinds of counseling, debt management and educational programs does the counseling organization provide?  It is always best to work with a credit counseling organization that provides a range of services, including budget counseling, and savings and debt management classes.  Educational information is good but most consumers need relief and help form the debt and credit problems.  The FTC recommends that consumers avoid organizations that primarily push a debt management plan (DMP).

Check and see if there are any upfront fees for the services and what all of the costs will be for the program offered.  Some agencies charge up front fees for their debt management programs and other services.  These fees may be so high that getting assistance is more costly than it is beneficial.  Get specific information on fees in writing before going forward. 

Is there a written agreement or contract for the services rendered?  Don’t sign anything without reading it first.  Make sure all promises and services to be performed are in writing.

What kind of training do they have for their staff and what qualifications do they posses to assist the consumers?  A good counseling agency provides its counselors with regular training.  Ask if they accredited or certified by an outside organization?  Do they work with lawyers, certified financial planners, and other professionals?

If you are using a debt management component of the counseling services, ask if you will receive regular updates and reports regarding your account status?  Within the debt management program, find out how often the creditors are paid.  Ask if the credit counselor will be able to help with all of your debts?  Some agencies offer little assistance for secured debts like car payments or mortgages, or government debts like taxes and student loans.  Make sure you receive the right service for your needs.

What kinds of measures are used to protect your information?  Check to see that the credit counseling organization has some process to keep your financial information and identity confidential and secure.  Be sure you know the agency’s privacy policy.  It is important that the agency you select has sufficient security in place to protect your confidential information.

Be careful with any credit counseling organization that guarantees they will be able to remove your debts or promise that these debts will be paid off for far less than you owe ( debt reductions are likely but no firm can assure it will happen ) or organizations that require large monthly fees or upfront fees or promise that using their system will have no negative impact on your credit report or claim that they can remove accurate negative information from your credit report.  Credit help and credit score help shouldn’t cost an arm and a leg.