How do I select a credit counselor?

One of the key reasons to work with a credit counselor is that you will create a plan to improve your credit. You also set financial goals and prepare a spending plan. In the process, you pay all of your original debts. Or, stated another way, you pay for every purchase you made with credit.

Some credit counseling agencies charge a fee based on what you can afford to pay. Others charge a set up fee of about $75, a consultation fee of $50, and a monthly fee of about $15.50 . If a credit counseling agency charges more than the ones mentioned here, you might want to shop around.

Be cautious! There are many credit counselors out there ready to take advantage of your bad situation and make it worse. Be very careful on who you work with. Here are two safe places to start:

NFCC
National Foundation for Credit Counseling
www.nfcc.org
1-800-388-2227

AICCCA
Association of Independent Consumer Credit Counseling Agencies
www.aiccca.org
1-800-450-1794

As you look for a credit-counseling agency, use this form as a guide to asking questions before you decide to work with one of them.

Choosing a Credit Counseling Agency
•	What services does the agency offer? Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan (DMP) as your only option before they spend a significant amount of time analyzing your financial situation.
•	Do the agency offer information? Are educational materials available for free? Avoid organizations that charge for information.
•	In addition to helping me solve my immediate problem, will the agency help me develop a plan for avoiding problems in the future? Changing your spending habits at this time of your life is very important. It might be the only way to avoid another credit crisis.
•	What are the agency's fees? Are there account set-up and/or monthly fees? Get a specific price quote in writing.
•	What if I can’t afford to pay teh agency's fees or make contributions? If an organization won’t help you because you can’t afford to pay, look elsewhere for help.
•	Will I have a formal written agreement or contract with the agency? Don’t sign anything without reading it first. Make sure all verbal promises are made in writing as well.
•	Is the agency licensed to offer its services in my state?
•	What are the qualifications of the agency's 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.
•	What assurance do I have that information about me (including my address, phone number, and financial information) will be kept confidential and secure?
•	How are the agency's employees compensated? Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization? If the answer is yes, consider it a red flag and go elsewhere for help.
Source: Federal Trade Commission, Fiscal Fitness

For more information on working with credit counselors and debt negotiation businesses, read the Federal Trade Commission’s Fiscal Fitness.