Choosing a Credit Counseling Service
Our motto at Credit Shack is that self-help is almost always the best path to getting out of debt. Self-help works because out-of-control spending ranks as the most common culprit for debt. Stop the spending, and you stop building debt. Stop building debt, and you’re on the way to recovery. Sounds easy? Sometimes it isn’t. You see, it’s learning to say “No” to the call of plastic that stops most people. Things get particularly dicey in family situations where couples have totally opposite ideas of how to manage the finances. Sometimes it’s necessary to seek personal debt assistance. Unfortunately, finding a good credit counseling service can be difficult.
When should I consider credit counseling?
We champion self-help debt payoff methods because they’re free. In most cases, we believe commercial credit counseling services can and should be avoided. When you’re trying to crawl out from under a mount of debt, the last thing you need is an expensive credit counseling service piling on more bills! Since when does going deeper into debt to get out of debt make any sense?
Self-help isn’t for everyone. You should consider a credit counseling service if you can’t resolve your debt problems yourself. For example, consider credit counseling if you or your spouse has a psychological compulsion – an addiction – to shopping & spending that you cannot resolve on your own. Getting out of debt requires both patience and determination – qualities not everyone enjoy. You should also consider a credit counseling service if you are unable to meet your monthly minimum payment obligations. It’s one thing to try getting out of debt yourself if finances are tight; but if you can’t pay the bills, you should consider credit counseling.
What do credit counselors do?
Exact counseling techniques vary. In general, credit counselors work with you to establish a budget. They negotiate mutually agreeable repayment arrangements with you and your creditors. Often credit counseling services offer to collect your payment and forward it to your creditors as part of a debt management plan. Most importantly, credit counseling services provide education to help you avoid falling into the debt trap again farther down the road.
What are some principles for choosing a credit counseling service?
Fraud and corruption run rampant in the credit industry, particularly in credit counseling and credit repair services. To make matters worse, a November 2003 Consumer Federation of America study shows that Americans are largely uneducated about credit counseling services. Low income individuals – presumably the most in need of credit counseling – demonstrated the least amount of knowledge about credit counseling. Low levels of education make it easier to be taken advantage of. Legitimate and beneficial credit counseling services indeed exist. However, finding them sometimes feels like searching for a needle in a haystack.
Find a local credit counselor. There are numerous non-profit organizations in every state that counsel consumers in debt at low or no cost to you. You are less likely to encounter fraud when you use a local, brick-and-mortar credit counseling organization. Local credit counseling carries that added advantage of personalized, face-to-face attention – a benefit Internet and telephone counseling services cannot provide.
Choose a non-profit counseling service. When searching for a credit counselor, you’re safest limiting your search to non-profit organizations. By narrowing your search to non-profits, you improve your chances of selecting a reputable credit counselor. However, selecting a credit counselor with non-profit status certainly does not prevent fraud. For example, the FTC filed a complaint in November 2003 against AmeriDebt, a Maryland-based non-profit credit counseling group. The claim alleged that AmeriDebt claimed to be a non-profit and marketed its services to consumers as “free,” although they retained the entire first debt repayment check (which was supposed to go to creditors) as a “contribution” to their organization.
Get specifics. Pay close attention to fees. Make sure that you understand the cost of the service, if any, upfront. Make sure you understand what the fees are for, so you don’t end up in a situation like the clients of AmeriDebt. Make sure that your creditors are willing to deal with the credit counseling service you choose. Creditors are only required to deal with you, not third-party counseling services. Finally, make sure that the counseling service you choose offers real education. Be wary if they simply try to enroll you in a debt management plan where they handle your money and forward payments.
Get references. Get input from others before selecting a counseling service. Search the Internet for reviews; ask friends who have had credit counseling for their advice; check with your local Better Business Bureau. Use your common sense.
Remember, credit counseling takes up the slack when self-help fails. If you’re considering a credit counseling service that doesn’t do anything you can’t already do on your own, keep looking. There’s no reason to pay someone to do a job you can do better yourself.
Wrapping up
To recap, here are the main points from this article:
- Self-help is usually best. Credit counseling services often cost money that you could be using to directly pay down your debts.
- If self-help isn’t working, consider credit counseling.
- Credit counselors help you budget and often will help you negotiate a repayment plan with your creditors.
- Avoid fraudulent counseling services by educating yourself, shopping locally, limiting your search to non-profits, getting specifics on their duties, and checking references.
- Credit counseling is only worthwhile when assists you in a way that self-help cannot.
