There are credit counseling agencies that rescue people from the
deepest financial holes. There are also credit counseling agencies that
just shovel in more dirt. How do you tell them apart?
by Joel Walsh
Signs of a Reliable Credit Counseling Agency
__Better Business Bureau Membership
The service's website should have a BBB logo and a link to their record
on the Better Business Bureau website. Click through the link to check
that there are no unresolved complaints against them. Many people only
think about the Better Business Bureau after they've been cheated, but
by then there's not much you can do. Working with a credit counseling
agency that is a member of the Better Business Bureau means that you
can go to them to help mediate any dispute you might have with the
service provider.
__Accreditation
Reputable credit counseling services will be accredited by an
independent nonprofit, just as many schools are. One such accreditation
body is the National Institute for Financial Counseling Education.
__Fees
A good credit counseling agency will charge a small, reasonable monthly
fee, usually around $30. Some also charge a fee upfront, though this
fee should be reasonable (around $50 tops). It may be possible to get a
hardship waiver of these fees if you truly do not have the $30-50.
__Clear Application
The application must clearly say what the fees to be paid are, what the
services to be provided are, and in what timeframe all of this will be
provided.
__Reasonable Promises
Run far, far away from any organization that proposes to "wipe out"
your debt for you, rather than simply helping you to repay the debt.
Short of your creditors just deciding to forget about the debt
(unlikely), there is no way to erase debt–even bankruptcy leaves a huge
mark on your credit report for ten years.
True, your car may not go missing from your driveway if you stop paying
unsecured debt (i.e., debt that is not "secured" with collateral, like
most credit cards, unlike most auto loans). But you are still legally
obligated to pay the debt, and the possibility of being taken to court
will loom over you. You will likely be unable to get even "bad credit"
financing if you still have debts in collections–good luck buying a car
or house.
Not Necessarily Signs of a Reliable Agency
XX Nonprofit Status
Nonprofit status is essentially a tax designation, not a government
endorsement of a group's mission. There are plenty of near-fraudulent
credit counseling agencies that are registered nonprofits.
XX Respectable Name
Any group can put words like "National," "Alliance," "Assistance," and
other trust-inspiring words in their name. But a name is just a name.
Make sure to check any organization against the list above to make sure
they're reliable. Also try searching for the group's name on a search
engine. Don't just look for a lack of negative reports–that might just
mean the group changed names recently. Instead, look for positive
reviews from real people, and preferably mention on reputable
third-party websites, such as news sites.
Ready to find a credit counseling agency? You're in the right place:
the web is full of credit counseling agencies. Just use the checklist
above, and you'll have no trouble separating the saints from the scams.
