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Is it time to bring in a credit counselor?

[Oct 7, 2011.]


While the phrase "nonprofit credit counselor" may sound trustworthy, some "nonprofit" counselors actually charge hidden fees or request contributions before working with you. The Federal Trade Commission (FTC) offers several tips that can help you decide which credit counselor to consult.

Before you get started, you will need to do some personal financial preparation work. Gather all your bills and bank statements and make a list of what you owe and all your sources of income. Next, start your search for a reputable credit counselor. You can start with the National Foundation for Credit Counseling and the U.S. Trustee Program's list of approved credit counseling companies.

The FTC recommends working with a local credit counselor so you can meet someone in person. The organization also suggests you can find a credit counselor by checking with your credit union or bank, a local consumer protection agency, a university or a military base for recommendations. You should check with the Better Business Bureau and your state Attorney General's office to be sure the counselor has a good reputation.

What to expect from a credit counselor

While your goal may be to get out of debt, when you work with a credit counselor you should expect a broader look at your finances. At the first meeting with your credit counselor, you will likely spend an hour or so going over your entire financial situation. The credit counselor will then make some recommendations that should help you with your money problems. You may need follow-up sessions to monitor your debt relief progress.

Here are some questions that the FTC recommends asking a potential credit counselor:

  1. Are you licensed in my state?

  2. What are your fees? Get a quote in writing for setup fees or monthly charges.

  3. Are educational materials available free of charge?

  4. What services do you offer? You should look for a counselor who can offer budget counseling and savings and debt management classes. Avoid a counselor who only offers a debt management plan or a debt consolidation loan, because there may be other debt solutions that meet your needs.

  5. Can you help me reduce debt now and plan so I can avoid future problems?

  6. What are your qualifications as a credit counselor? Try to find a counselor who is certified or accredited by an outside organization rather than their own.

Whether or not you need to consider a debt management plan or a debt consolidation loan, a credit counselor can work with you to develop an individualized solution and reduce your dependence on payday loans.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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