If you’ve decided to take the leap and finally do something about your debt through credit counseling, knowing what to look for can make all the difference. Most credit counseling agencies are legitimate organizations that can help you better manage your money, but knowing what to look out for can ensure you make the right decision for yourself.
Verify Credentials
Typically, credit counseling agencies should be nonprofit organizations with a recognized accreditation. If you see a credit counseling agency affiliated with the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA), you’re in good hands. Reputable agencies offer free budget counseling and debt management while providing free educational material that can help you gain greater financial literacy. Additionally, the counselors should also be certified in consumer credit.
Warning Signs
If an agency wants payment before providing any services, or promises to dramatically reduce your debt in a short amount of time, look elsewhere. Initial counseling sessions and educational resources should be free.
Be cautious of companies that present themselves like credit counseling agencies but are actually debt settlement companies. These for-profit businesses often charge high fees and advise clients to stop paying their creditors, which can seriously damage your credit score. You should also avoid any organization that asks for personal financial details before telling you about itself and its services, or that pushes you into a debt management plan (DMP) too quickly or offers it as its only solution.
Ask the Right Questions
According to the FTC, there are a number of questions you should ask to help with the vetting process when searching for a reputable credit counseling agency. These questions include:
- What service do you offer?
- Do you offer free information?
- What are your fees?
- What are my counselor’s qualifications?
- How confidential is my information?
- How long will a debt management plan take?
It’s important to know that a legitimate organization should offer a variety of services, including counseling and debt management program enrollment; free financial education; and no upfront fees. A debt management plan typically costs about $25–$50 a month to maintain, but most of the services should be available at no cost.
Bottom Line
Doing your research and asking the right questions can help you find the right credit counseling agency for you. They’ll provide greater understanding of your financial health and offer a pathway to better money management, all while supporting you as you work towards being debt-free.