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Choosing a Credit Counselor

For some, spending is as hard to quit as alcohol, drugs or gambling. For others, circumstances beyond their control medical conditions, job loss or divorce helped dig them deep into debt. Whatever your situation, it never hurts to get professional help. Talk with a credit counselor privately to see whether a debt repayment program may be right for you.

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Many credit counseling companies are nonprofit and work with you to solve your financial problems. But beware just because a company says it is "nonprofit" doesn't guarantee that its services are free or affordable, or that its services are legitimate. In fact, some credit counseling companies charge high fees, some of which may be hidden, or urge consumers to make "voluntary" contributions that cause them to fall deeper into debt.

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Most credit counselors offer services through local offices, the Internet, or on the telephone. Many universities, military bases, credit unions, and housing authorities operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

Reputable credit counseling companies advise you on managing your money and debts, help you develop a budget, and usually offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

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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 developed a list of potential counseling agencies, check them out with your state Attorney General, local consumer protection agency, and Better Business Bureau. They can tell you if consumers have filed complaints about them. (If they don't have complaints about them, it's not a guarantee that they're legitimate.) Then, it's time for you to interview the final "candidates."

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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?

Is the agency accredited through an independent, third-party association such as the Council on Accreditation? Are counselors certified? If not, what kind of training do they have?
Members of the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies are all accredited agencies with certified counselors.

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 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.

And you don't need to pay a credit counselor to receive a new payment plan from a creditor. You could simply call a credit card company and ask for help on your own. All they can do is say no.

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