Choosing the Right Credit Counselor

Millions of Americans are living paycheck to paycheck and are in a perpetual state of worry about debt collectors. With the recent recession, job losses and foreclosures, many can’t find a way to plan a budget when there’s no money to budget. That means retirement plans have been cashed out, bankruptcies are being considered and the once high credit scores take a hit month after month.

If any of that sounds familiar, you might want to rethink your options to include a credit counselor. Before you do, read our tips on finding the right counselor who can see your vision for a better financial future and who will then work to ensure it comes full circle. There are many credit counseling companies and organizations that work from a nonprofit scope and who will work with you as you move to resolve your financial problems.

Success Rates

First things first – just as there are many above board and credible organizations, there are also those that claim to be nonprofit or that tout high success rates. That’s not always the case, though. Some of these companies tack on high fees to your payment plans and in recent years, there are those that even strongly advise their clients to make “donations” to their organizations so that they can continue their work with other families.

It can be difficult to discern the ethical companies from those that take advantage of consumers who are looking for help and while the internet is a powerful tool, often, these companies will capitalize on the fact that it’s the first place many turn to. Your goal is to find an organization that offers in-person counseling. And they’re available in your community – credit unions banks, state co-op extension services and even state universities can help with locating one that’s truly what it says it is and that will work diligently to help you as you help yourself. At a minimum, you should consider contacting any of these local or state bodies for referrals. Even a friend or family member who opted for credit counseling can give you an idea of where to turn on a local basis.

Know the Goal

Remember, the primary function of a reputable credit counseling organization is to simply advise you on managing your finances and your debt load. They should also have the capabilities and trained personnel who can help you develop a strong and realistic budget – and yes, even when it seems there’s no money to budget, you might be surprised at what you uncover as you move through the process. There’s a difference in being hopeless and realistic and the reality is things are not likely as bad as you seem and even in those worse case scenarios, it’s all “fixable”.

Your counselor should be able to discuss your entire financial situation with you while working with you to develop a very personalized and specific money management plan so that you’re not only paying down debt, but you’re also rebuilding that savings and retirement plan that seemed to evaporate over the past few years. You’re not alone on that end, either. Many families found themselves having to turn to their retirement plans to make ends meet over the past several years.

As you’re doing your research, ask any agencies you contact to provide certain information. 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.

What to Expect

After you schedule your meeting, here’s what you can expect in that initial consultation:

  • An initial counseling session typically lasts an hour, so plan accordingly and it could last slightly longer than hour, depending on the counselor and your needs.
  • Get your bills, bank statements, credit card statements, student loan documents, garnishment notices, tax forms – all of the financial documents you’ll need to paint an accurate picture of your current debt load. Bring that with you to your initial meeting.
  • It’s entirely possible that your counselor will want to run copies of some or all of those documents. You should know a credible organization will treat it as the confidential information it is.
  • A follow up meeting will likely be planned with assurances you can call him or her with any questions that come up between then and now.
  • Your counselor will also give you an idea of which way he or she thinks is the best direction for your plan.
  • Your counselor should be willing to answer any questions you have, including questions on bankruptcy, foreclosure and how long it might realistically take to find your way back.

Ask Questions

Here are some questions you might want to consider asking during your initial meeting:

Are you licensed to offer your services in my state? What services do you offer? Look for a company that takes a “everything is on the table approach” and that offers a range of services, including budget counseling, and savings and debt management classes. Avoid those companies that push one solution only, especially if it’s not even heard the specifics of your situation.

Do you offer educational information? Remember, part of the process is to learn from these tough times so that you’re better prepared for any future problems. And they should offer it for free.

What are your fees? Just because an agency charges a fee doesn’t make it a bad choice. But – those fees should be stated up front and they should be reasonable. Get the quote in writing, too.

What kind of qualifications do you possess? Remember – you’re looking for someone who can help you solve financial problems. Ask about any accreditation, too.

What assurance do I have that my identity is safe and the information I give you is safe? A credible company will happily share the security measures it has in place.

Finally, as we were researching for this article, we discovered advice offered by the Federal Trade Commission and an important question it encourages consumers to ask is how the company or agency’s employees are compensated. Ask if they receive more pay if the consumers sign up for additional services or if they receive bonuses if they’re able to get you to make donations. These are important questions and ones you certainly should ask.

A bit of due diligence can go a long way in your efforts of choosing an agency to assist you in your efforts of picking up the pieces. The last thing you want is to do business with a company that will take advantage of an already difficult situation.

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