Friday, August 17, 2012

Five Tips for When Choosing a Credit Counselor

A good credit counselor is a lifeline when you are drowning in debt. The Federal Trade Commission (FTC) website explains that legitimate credit counseling firms provide materials, education, budgeting help, negotiation with creditors and debt managements plans. Some counseling companies are not legitimate, even if they run fancy ads or make expansive promises, the Better Business Bureau (BBB) warns. Choose a counselor carefully to avoid getting scammed.

Services Offered

    Choose a credit counseling firm that offers a complete range of services. The FTC website warns that some credit counselors try to pressure you into a debt management plan without discussing your personal financial situation. A good counseling firm has materials to help you develop your own budget, classes and other options in addition to formal plans. The counselor should have enough resources to help you choose the least burdensome form of help.

Licensing and Training

    Check the counseling firm's licensing and ask if its counselors are trained and certified by an outside source, like a professional organization. Many firms are nonprofit, but this does not necessarily mean that they are honest or that their fees are affordable. The BBB website warns that legitimate counseling firms should be licensed in states that require it and have properly educated counselors.

Cost

    Ask how much the counseling firm charges for its services. Legitimate credit counselors disclose this information upfront and put it in writing upon request, according to the FTC. A good credit counselor should not turn you away if you cannot afford to pay for services. Ask how the firm compensates its counselors, and stay away from those that offer employee incentives for locking you into a debt management plan or other specific services. Otherwise, you could get pushed into unneeded services so the counselor can earn more money.

Privacy

    Ask about the credit counseling firm's privacy and security policies, the BBB advises. Credit counselors gather sensitive personal and financial information about you, including your name, address and account data. A procedure for securing personal information should be in place so that your information cannot fall into the hands of identity thieves. Otherwise, your credit problems could be compounded by criminals opening more accounts in your name.

Written Contracts

    Ask whether the credit counselor puts agreements in writing before you proceed with a debt management plan or other services. Legitimate credit counseling firms provide written contracts, the FTC explains. Verbal promises and assurances are not enforceable, so reject any counselor who refuses to put everything on paper, including specific fee details.

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