Choosing a Credit Counselor:
Living paycheck to paycheck? Worried about debt collectors? Can’t seem to develop a workable budget, let alone save money for retirement? If this sounds familiar, you may be considering the services of a credit counselor.
Most reputable credit counselors are non-profit and offer services at local offices, online, or on the phone. 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 non-profit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
But be aware that “non-profit” status doesn’t guarantee that services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which they made hide; others might urge their clients to make “voluntary” contributions that can cause more debt.
Choosing a Credit Counseling Organization
Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. They discuss your entire financial situation with you, and help you develop a personalized plan to deal with your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
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.
Once you’ve got a list of counseling agencies you might do business with, check each one out with your state Attorney General and local consumer protection agency. They can tell you if consumers have filed complaints about any one of them. (If there are no complaints about them, don’t consider it a guarantee that they’re legitimate.) The United States Trustee Program also keeps a list of credit counseling agencies approved to provide pre-bankruptcy counseling. After you’ve done your background investigation, you will want to interview the final “candidates.”
Questions to Ask
Here are some questions to ask to help you find the best counselor for you.
What services do you 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 you offer information? Are educational materials available for free? Avoid organizations that charge for information.
In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
What are your fees? Are there set-up and/or monthly fees? Get a specific price quote in writing.
What if I can’t afford to pay your 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 you? Don’t sign anything without reading it first. Make sure all verbal promises are 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? 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 your employees paid? 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.
Fraudulent Debt Relief Companies
Numerous companies promise cash-strapped consumers that they will negotiate with credit card companies to lower their balances. Often these companies fail to perform.
These companies pocket their fees and leave consumers even further in debt, with wrecked credit ratings, and facing the possibility of bankruptcy. Additionally, many of these companies charge fees and expenses that are excessive and exceed the amount permitted by state and federal law. These are companies I would stay away from. Consider the companies recommended on this website.
For example, Kershaw, Cutter & Ratinoff investigates companies they receive complaints of fraudulent activities. Among the companies they have investigated are:
Freedom Debt Relief
American Debt Foundation, Inc.
American Financial Service
Consumer Debt Solutions
Credit Answers L.L.C.
Debt Remedy Solutions, L.L.C.
Debt Settlement America
Debt Settlement USA
DMB Financial L.L.C.
New Era Debt Solutions
New Horizons Debt Relief, Inc.
Preferred Financial Services, Inc.
U.S. Financial Management, Inc., also known as My Debt Negotiation
Do your homework
Facing mounting bills can be frightening, but getting debt relief is not a decision that should be based on hearing a radio commercial or getting a sales call. You want to find an organization that will design a debt relief plan specifically for you.
Shop around. Compare a couple of services and get a feel for how they operate. The credit counselor should spend at least 20 to 30 minutes with you in order to get a complete picture of your finances. If they don’t do that, you’re not really getting any counseling.
Ask a lot of questions and get those answers in writing. Find out about the fees. If the agency is vague or reluctant to talk about fees, go someplace else.
Don’t rely on names or the claim of a non-profit status. Check them out with the Better Business Bureau or your local consumer protection office. First try the resources recommended on this website. These are companies that my clients have had good results with over the past ten years. Let me know your experiences. Contact me if you have any questions. I’m here to help you! Sign up for my latest email alerts.
The majority, or 56 percent, of consumers have subprime credit scores, according to a report released by the Corporation for Enterprise Development (CFED), a nonprofit that advocates for policy changes to help low and moderate-income households. As a result, these consumers are often locked out of the lending markets. And if they are borrowing, chances are they’re missing out on the lowest rates being offered to consumers with stronger credit.
“There are millions of Americans who are being excluded from the financial mainstream,” says Jennifer Brooks, director of state and local policy at CFED and lead author of the report. “They’re relegated to using fringe, often high cost financial products that trap them in a cycle of debt.”
Credit experts say the report is a reminder that even as many Americans are returning to work and earning steady paychecks for the first time in a while, repairing credit takes time. Late payments and delinquent accounts that are sent to collections, such as defaulted credit cards or a foreclosure, can stay on your credit report for up to seven years. Bankruptcy filings can stay on there for up to 10 years.
“In the world of consumer credit scoring, if you mess up, it’s a seven to 10 year penalty,” says John Ulzheimer, president of consumer education at CreditSeseme credit management Web site. Go to CreditSesame now and get started fixing your bad credit rating.
Interest rates on credit cards are typically not fixed, so they’re especially vulnerable to changes in the federal funds rate.That means when the Fed’s raise interest rates and you are carrying credit card debt, you can probably expect your interest rate — and also your minimum payment — to rise. That will make it harder to reduce your debt.
But there are moves you can make to take the sting out of climbing credit card interest.
Reducing your credit card debt aggressively is a good idea no matter what rates do. Re-evaluate your budget to see if you can free up any cash to pay down your credit card balances, and think about whether you can increase your income, even temporarily.
As interest rates rise, make sure you’re making at least the minimum payments on time, on every card. This will help strengthen your credit score over time, which will make it easier to qualify for lower-interest loans.
Remember, any effects a rate hike may have on interest-rates in the long-term can be mitigated by a good credit score. Good credit generally entitles you to the best terms and conditions on new loans and can be handy in potentially negotiating new interest rates on certain old ones, like a credit card. You can see where your credit stands by viewing your credit score on Myfico.com.
Here is a another way on how to complain about errors on your credit report.
The Consumer Financial Protection Bureau is another way on how to complain about errors on your credit report. The CFPB is now accepting complaints if you have been ignored by Experian, Equifax or Transunion over errors on your credit report.
The Consumer Financial Protection Bureau can assist with the following complaints:
Incorrect information on your credit report
Improper use of your credit report
Being unable to get a copy of your credit score or file
Problems with credit monitoring or identify protection services
You first have to use the credit report agency’s official process for disputing an error on your report.
The Consumer Financial Protection Bureau is cracking down on already illegal practices used by debt collectors too.
Don’t hesitate to use this service if it becomes necessary.