How to Choose Credit Counseling Services That Are Right for You

Learn What to Look for in a Credit Counseling Service Provider

If you are considering signing up for credit counseling services, it means you are looking to change your life. Choosing to reduce your debt with the help of a Certified Credit Counselor is a huge, and positive, step towards gaining financial stability.

A credit counseling service can improve many aspects of your life. It can help you get out of debt faster and improve your credit. There are many agencies out there that would love to quickly enroll you in their Debt Management Program. However, not all agencies are created equal and not all agencies are truly looking out for your best interest. As with most things in life, if it sounds too good to be true, it probably is. That's why we're going to show you:

• What to look for in a Credit Counseling Agency
• What questions you should ask
• Warning Signs that you may not be dealing with an ethical practice

So what should you look for first while considering Credit Counseling? Well, at a bare minimum, you should look for a non-profit, experienced credit counseling agency that can provide personalized service, coupled with sound financial education to ensure a long-term solution to eliminating your debt.

Other important factors include:

AICCCA or NFCC Membership
The Association of Independent Consumer Credit Counseling Agencies (AICCCA) and the National Foundation for Credit Counseling (NFCC), are industry associations that require extremely high standards for all of their members. If the agency you are dealing with is a member in good standing with either of these associations, it is a good sign that they are properly accredited and have certified counselors because the associations require it.

ISO 9001 Certification or Council on Accreditation (COA)
The agency should have ISO accreditation or COA, which means that they have successfully completed independent audits to ensure that they are complying with all the industry standards. If the agency is a member of the AICCCA or NFCC, they must have one of these accreditations.

Certified Counselors
The credit counselors you speak with on the phone should be trained and certified by an independent certification body such as the Association for Financial Counseling and Planning Education (AFCPE). This way you can be sure that your counselor really knows what he or she is talking about.

Also, make sure that your counselor will not receive a bonus for enrolling you on their program. That’s a sure sign of a salesperson, not a credit counselor!

Once you have found a credit counseling organization that meets these requirements, there are still a hand full of questions that you should be asking in order to find the absolute best agency for your needs. Some of these questions should include:

What about costs?
Whether they request "fees" or "contributions", they should be disclosed and should be reasonable. Anything over $50 for a consultation fee or monthly fee or contribution is NOT reasonable.

MAKE SURE – the agency is not planning to keep the first month's payment as their fee! This is known as a bad practice in the industry and has been the source of state attorney general lawsuits as well as many individual actions against the agencies that do this.

Is the agency licensed to do business in your state?
Some states require that credit counseling agencies be licensed or that its counselors pass certain minimum standards in order to do business in that state.

What can you expect in the counseling process?
In the first place, did they ask you about your particular situation and tell you about some options or did they start "selling" a solution, such as a debt management plan to you without knowing anything about you? If so, thank them for their time and look elsewhere.

Ongoing Education?
The better agencies will provide monthly newsletters, website articles and training programs for you to take advantage of. As part of the non-profit mission of credit counseling agencies, this education should always be provided to you free of charge.

Out of Debt in Approximately Five Years?
If you enroll in a debt management plan, make sure you will be out of debt in approximately five years. Also make sure you will get monthly statements from the agency showing your progress.

How Long Will They Hold Your Money?
There is no reason for the agency to hold your check or money order any longer than ten days to ensure that it will clear the bank. Electronic payments can really help get your payments to your creditors faster. Ask about this option.

Where Will Your Money Be Held?
Your money should be held in a separate Trust Account. This will ensure that the agency can’t use your money for anything other than paying your creditors. Again, some states actually require this.

Who are you dealing with?
Ask if any of the important functions of the agency are outsourced or handled by another company, especially a for-profit organization. If so, they’re not "truly" non-profit are they?

Who Are the Agency’s Board Members?
They should be independent, experienced professionals with diverse backgrounds that are not also employees of the agency. That way, you can be more assured that the agency is following ethical business practices.

Get a Copy of the Contract Before You Sign It!

Make sure the contract includes:

• Disclosure of the amount of your fee or contribution
• Description of the services to be provided
• An estimate of the payoff schedule for the debts
• Disclosure of the termination provisions of the agreement
• Options for resolution of disputes

Finally, we would like you to be aware of a few warning signs to look out for, because if you notice any of them – there’s a good chance the agency you're dealing with is not the Credit Counseling agency for you.

The following are some red flags that you should look for when interviewing an agency:

• Unrealistic Low Monthly Payments
• Money Back Offers
• Loan Programs
• If the promises being made seem like they’re too good to be true, they probably are. Beware.

Aggressive Sales Tactics
Don’t feel pressured by unsolicited phone calls or e-mails into signing up with an agency. A credit counseling consultation should always be free and joining a debt management plan requires your serious and thoughtful consideration, not high-pressure sales tactics.

Keeping Your First Payment as a Fee
Some agencies might try to take your first month’s payment as a fee or contribution. This is completely unethical and a major red flag to look out for. It is extremely important that your first payment, and every payment there after, go towards paying down your debt.

Beware of Debt Settlement Companies
Debt settlement companies typically hold onto your monthly payments until they have a designated amount accumulated, then they send a payment to your creditors. This can cause your creditors to continue showing you as delinquent, continue charging you late fees and continue calling you at home. These are all the things you're trying to avoid!

You have made the first step towards reaching financial freedom. Now you must make the next big step and choose the Credit Counseling Agency that is best for you. Remember, you want to work with an agency whose goals are in line with yours; reducing your debt and providing the support you need to live a life of financial stability.