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How to Choose a Credit Counseling Agency

How to Choose a Credit Counseling Agency

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How to Choose a Credit Counseling Agency
How to Choose a Credit Counseling Agency

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Published by: research@infoguanxi.com on Sep 21, 2009
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Being in debt is not easy.
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If you're struggling with debt, it can seem as though there's no one toturn to. But in reality, with the boom of consumer credit counselingagencies, there are plenty of people willing to talk with you about yourdebt problems. The question is, are they worth talking to? The answerdepends on the agency. The steps below can help you avoid the ripoffsand choose the right credit counselor for you.
Steps
Check with organizations you trust
. Many universities, creditunions, military bases, housing authorities and local agencies (suchas the USDA extension service in the U.S. and Citizens AdviceBureaux in the U.K.) offer free or low-cost debt counseling. If youwork for a large company, your employee assistance plan may alsooffer credit counseling or referrals. While these organizationstypically don't offer debt management programs, they do provide awide range of other services, including budget planning, and they canhelp you decide if a debt management program is right for you.1.
Ask friends and family
. Consumer debt is a widespread problem, so you might know someone who hasalready used a credit counseling service. Some people are hesitant to talk about financial matters, but itdoesn't hurt to ask around, especially if you know someone has been through credit counseling. Friends,family, and other trusted associates can also provide a wealth of advice on financial issues.2.
Look for a non-profit agency
with a long history. Choosing a non-profit agency can help you minimizethe cost of credit counseling, but be aware that non-profit status is no guarantee of an agency'slegitimacy, and it's also no guarantee that their fees will be reasonable. Many credit counseling agencies3. 
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How to Choose a Credit Counseling Agency - wikiHowhttp://www.wikihow.com/Choose-a-Credit-Counseling-Agency1 of 59/20/2009 6:31 PM
 
are non-profits, and some are better than others. The longer an agency has been in business, the more likely itis that it is legitimate and won't go out of business after you've begun a debt management plan with them, sotry to find one that has been in business for at least 5-10 years.
Find an accredited agency.
In the U.S., make sure an agency is a current member in good standing of atleast one of two large trade associations, the National Foundation for Credit Counseling (NFCC) and theAssociation of Independent Consumer Credit Counseling Agencies (AICCCA), which require rigorous third-partyaccreditation for their members. You can look at these organizations' websites to find an agency near you. Anagency should be accredited by either the Council on Accreditation (COA) or the International Organization forStandardization (ISO). Like non-profit status, accreditation is a good sign, but it's no guarantee of an agency'squality.4.
Make sure the agency is licensed
, if required. Not all states in the U.S. or jurisdictions in the world requirecredit counseling agencies to be licensed, but if your jurisdiction does, make sure the agency you're consideringis currently licensed. Licensing is administered by different agencies--departments of corporations,departments of commerce, or divisions of banking, for example--in different places, so you may have to makea few phone calls to find the appropriate agency. Again, keep in mind that you still need to do your duediligence even if a firm is licensed.In the U.S., all people considering bankruptcy must receive credit counseling from an agency approved bythe Department of Justice. You can locate an approved agency on the DOJ's website.If you need assistance with mortgage debt, find an agency that is certified by the U.S. Department ofHousing and Urban Development (HUD).5.
Look for complaints
. Compile a list of potential agencies--preferably ones that have an office near you toprovide in-person counseling--and research them with agencies where complaints might be filed.Look at the company's reliability report with the Better Business Bureau. It should be both listed and free ofunresolved complaints. Check the Bureau's website and watch out for companies with a long list ofcomplaints. Look at how long the company has been in business and contrast that against the number ofcomplaints the company has had. It's very rare for a company to be in business for very long without gettingany complaints, but don't consider any company that's only been in business for a short time yet has a listof complaints with the BBB. If a company does have complaints, be sure they are resolved. Ask thecompany about the complaint and trust your gut when you hear their response.Check with your state attorney general. In the U.S. the National Association of Attorneys General maintainscontact information for state attorneys general offices. Look up the company on your state attorneygeneral's website, or call the AG's office to find out if any complaints have been filed against an agency.Check with the relevant regulatory authority in your jurisdiction. If you live outside of the U.S., contact theappropriate consumer protection, commerce, or banking agency in charge of regulating credit counselingagencies and tracking complaints.6.
Ask for information about the firm
. Reputable credit counseling agencies will provide free information abouttheir services without asking you for money or requiring that you provide them with personal information aboutyour finances. If a company wants an upfront fee or won't talk about the services they provide without seeingyour credit card statements or other information, don't bother with them.Seek an agency that provides a wide range of services. A lot of so-called credit counseling agencies shouldreally be called debt management agencies, because they push all their clients into debt management plansright away, often without offering any real counseling. Don't deal with these agencies, as most people don'treally need to enroll in a debt management plan. Look for an agency that will provide budget advice, savingsand credit classes and free educational materials in addition to debt management plans.Ask about the qualifications of their counselors. Find out if the counselors are certified or accredited by anindependent agency. If not, ask how they are trained and what other qualifications they have.7.
ow to Choose a Credit Counseling Agency - wikiHowhttp://www.wikihow.com/Choose-a-Credit-Counseling-Agency2 of 59/20/2009 6:31 PM
 
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Ask how employees are compensated. Some agencies pay their counselors incentives if they persuadecustomers to sign up for certain services. This means that the counselors may not always have your bestinterest at heart.Inquire about the security of your personal information. If you participate in credit counseling, the agency willprobably have access to your personal financial information, including credit card statements and other bills.This is especially true if you enter a debt management program. Make sure that your information will besafe by inquiring about their privacy policies and safeguards.
Don't pay unreasonable fees
. In the U.K. you can generally obtain counseling absolutely free. In the U.S., it isnormal for an agency to charge a small fee, but you should never have to pay exorbitant fees. You may be ableto get at least one or two free consultations (or at least an hour's worth of free consultation), and in mostcircumstances fees should be no more than $50 for all your counseling needs. If you are truly unable to pay thefees, ask the agency if they can be waived. If they aren't willing to waive the fee in this circumstance, lookelsewhere. Get fee information in writing, and read it carefully to make sure that you don't get bitten by anyadditional monthly fees or other charges after the initial fee.8.
Choose a debt management program carefully.
If you can benefit from participating in a debt managementprogram, be sure to do some extra research before enrolling. These programs differ from counseling in thatthey require you to actually entrust your debt payments to the counseling agency, who then disbursespayments to your creditors. See the related wikiHow for guidelines on what to look for in a debt managementprogram, and be very careful when choosing such a plan, even if you've already been working with a creditcounseling agency.9.
Tips
If your jurisdiction requires licensing for credit counseling agencies, there may be exemptions. For example,some states do not require non-profit agencies to be licensed, and some do not require licensing of agenciesthat perform only free services. If you find that an agency is not licensed, ask the regulatory agency if there areapplicable exemptions to licensing.Do your own research. There are a lot of options (i.e. debt management, consolidation, and debt negotiation)for people with debt problems. If you take time to learn more about these options you'll benefit more from yourcounseling and you'll be able to make informed decisions about your counselor's recommendations. You cannever know too much, but if you know too little, you're just asking to get ripped off.Credit counseling can work wonders to help you get out of debt, but it's not effortless. Your counselor can helpyou make a budget and work out a payment plan, but it's up to you to follow through.You can also be your own credit counselor. Once you make the decision to be debt-free and live on a cashbasis, cut and throw away your credit cards, then call each of your credit card companies and negotiate asettlement. Pay off the amounts you negotiated, and enjoy your freedom. If you have a Significant Other,support each other in this endeavor and you'll both reap the benefits.Credit Counseling services require a fee and have no more power than you do. Create a simple budget.Organize and prioritize your debts then call each creditor to discuss a new payment plan. When using a CreditCounseling service, the chances of a negative impact on your credit report is higher than if you called thecreditors and handled it yourself.If you decide to go it alone be aware that most creditors will be interested in getting their principal back. Thatis, they want the money from the cost of the original purchase. If you explain that you are willing to pay off theprinciple in fixed amounts and that you may have to declare bankruptcy if you have to pay finance fees thecreditor may be willing to wipe any interest. You must be willing to stick to a payment plan to make this optionwork. If you break the agreement the creditor will no doubt reinstate all interest charges and possible late fees,etc.
How to Choose a Credit Counseling Agency - wikiHowhttp://www.wikihow.com/Choose-a-Credit-Counseling-Agency3 of 59/20/2009 6:31 PM

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