Consulting A Credit Counselor
You may feel hopelessly overwhelmed by your debt and see no way out from under the burden, but before you take the drastic step of filing for bankruptcy, consider consulting with a reputable credit counselor.
A credit counselor will first review your debts and your ability to pay them, then set up a supervised payment plan. These services are free or very low cost. An important part of the plan is your agreement not to apply for any new credit or incur any additional debt while you're on the program.
Credit counselors typically create a two or three year schedule for eliminating your debts. They they notify your lenders to get them off your back. Each month you write a check to the counseling agency for the specified payment amount and counselors mail out separate checks to your creditors. About 60% of the people who go to credit counselors for assistance find that within 3 1/2 years, they've wiped their debt clean.
Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But just because an organization says it is “nonprofit” doesn’t guarantee that its services are free or affordable, or that its services are legitimate. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs.
For the name, address and phone number of the closest member of the National Foundation for Credit Counseling (NFCC) call 1-800-388-2227. Most members of the NFCC are known as Consumer Credit Counseling Service (CCCS) and provide free or low cost debt counseling.
When to contact a credit counselor
- When you can't pay the minimums on your credit cards.
- When you're consistently late paying one or more of your regular bills.
- When you're being hounded by creditors and collection agencies.
- When your efforts to work out reasonable repayment plans with your creditors have failed.
Red flags to avoid when contacting a credit counselor
1. Big upfront fees. Consumer Credit Counseling Services typically charge a $10 set-up fee or no fee at all.
2.
No accreditation. Legitimate credit counseling firms are affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.
3. Unrealistic promises. Some companies falsely promise that you can settle your debts for little or no money, without hurting your credit rating.
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.
Questions to ask to help you find the best counselor for you.
What are your fees? Get a specific price quote in writing.
Are you licensed to offer your services in my state?
What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, by whom?
How are your 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?
