A credit counselor – also called a debt counselor – is someone who professionally helps others to manage their credit and debt. They do so by helping their clients to develop debt management plans (DMPs) and careful budgets. The services of such professionals can be instrumental for people who are up to their necks in debt and cannot come up with any solutions. However, while some credit counselors are legitimate professionals who provide the best services available, others are wholly self-interested opportunists who provide little or no help for the fees they charge. For this reason, if you are in need of credit counseling, it is very important to go through the proper steps in determining which credit counselors are worth your attention.
Check For Affiliation
Various reputable nationwide organizations provide oversight for credit counselors, the most prominent one being the National Foundation for Credit Counseling (NFCC). This foundation requires its affiliates to abide by strict ethical and financial standards and it investigates to make sure that these requirements are met. A legitimate credit counselor should be affiliated with some such organization. If you discover that a credit counselor you are considering has no such affiliation, you should probably find someone else to work with.
Check With The Better Business Bureau
The Better Business Bureau is an organization that seeks to protect consumers and provide transparency regarding companies. You can investigate credit counseling agencies by looking them up on the Better Business Bureau website. If a particular agency does not have a score listed, this is not necessarily a sign of illegitimacy. Plenty of good agencies have no listings. However, if an agency has a poor rating with the Better Business Bureau, that is almost always a sure sign that you should stay away.
Look For Professionalism
A legitimate credit counselor should work from an office, have a website and have a dedicated business phone line. He or she should also deal with you in a professional manner. This level of professionalism will be most apparent when the counselor conducts the initial investigation to determine your financial situation. Inexperienced or opportunistic credit counselors will ask you to give estimates without verification while legitimate credit counselors will ask you to provide exact documentation of all of your debts.
Consider Suspicious Advertising
Credit counseling firms that advertise by creating flamboyant presentations with untenable claims are usually illegitimate. No credit counselor can guarantee a 100 percent removal of debt. Those who claim to have this ability usually charge up-front fees and often do not deliver on their promises to clients.
Differentiate Between Credit Counseling And Debt Settlement
The firms that heavily advertise and make untenable claims about credit counseling are usually in the business of debt settlement rather than credit counseling. While credit counselors provide guidance and information to help people deal with their debt and credit issues, debt settlement firms are supposed to work as an intermediary between debtors and creditors. Even though some debt settlement firms can help to cancel debts with creditors, they are often unsuccessful. When they are successful, they often do so to the detriment of your credit score. One example of this is debt settlement firms who counsel their clients to stop making payments on their debts and tell their creditors that they will not be paying anymore. Such tactics may result in a cancellation or settlement of debt, but they also tend to result in a complete destruction of the client's credit score.
Recognize True Non-Profit Organizations
Most legitimate credit counseling organizations are run on a non-profit basis. They may still charge fees, but these fees tend to be low or even optional. Even if they require a fee to talk to a counselor, they usually offer free information to everyone. However, some unscrupulous organizations claim to be non-profit when they actually are not. They may have an actual non-profit organization that is connected to various for-profit affiliates. The affiliates keep the non-profit organization alive because it brings them clients. To make sure that an organization is truly non-profit, find out how they can help you if you cannot afford to pay them and find out what free resources they have. If they do not provide any such free help or resources, they are probably not a non-profit.
Legitimate credit counselors should be willing to work with people by only requiring nominal fees – such as $25 per month of service. They should not require clients to make a large lump-sum payment before providing any services. Those that do so tend to simply take the money and never provide any real debt help.
Ask About Debt Limitations
Legitimate credit counselors should not care whether your debts amount to $1,000 or $1,000,000. Those that require clients to have a minimum amount of debt usually do so because they are profit-oriented and charge fees based on the amount of debt they can settle. Do not work with such firms.
Look For A Self-Help Attitude
Credit counselors who truly have their clients' best interests in mind seek to provide services that help people deal with debt while repairing credit scores, and they do so by showing clients how to manage their finances in a healthy manner over a prolonged period. This is where the true strength of credit counseling lies: within the individual. You are the only one who can fix your financial situation. Credit counselors who promise quick and easy fixes to your credit problems will often only make those problems worse by taking your money and giving you nothing. Legitimate credit counselors are simply there to point you in the right direction and give some much-needed guidance.
Keep these tips in mind if you are in the market for a credit counselor. Doing your homework ahead of time will help to ensure that you get the best help with your financial situation.