If you want to learn how to find a reputable credit counseling agency, this article covers the key questions you should ask to avoid the scammers. Specifically, you want to press them about licensing, accreditation, services, and fees. Here are the top seven questions.
Question #1: What source can I use to verify that you’re a federally approved, non-profit, and licensed company authorized to operate in my state?
To do business in a state, a reputable credit counseling agency should obtain a Certificate of Authority. This license serves the purpose of letting you know that the agency has agreed to use best practices in it’s business dealings and follow the state’s rules.
You should be able to contact the Secretary of State for your state to verify the license. But ask the agency this question to see what they say. They may reveal something that might lead you to distrust their intentions.
Also, find out if they are affiliated with a national association such as the National Foundation of Credit Counseling. This is a body that has strict guidelines that credit counseling agencies must follow with regard to their finances, service quality, and ethics. The Council on Accreditation is another independent group that reputable agencies might associate with.
You can also visit this link to get a list of federally approved credit counseling agencies for your state. But don’t let your research stop there.
For example, there are plenty of credit counseling agencies that tout their non-profit credentials, but that doesn’t mean they won’t try to squeeze as much money out of you as possible.
Question #2: What services do you provide?
Depending on the agency you choose, credit counseling could be done in person or online. Either way, you’ll probably have a few meetings with your credit counselor.
In addition to getting to know one another and answering any further questions you might have, the counselor will want to start gathering information from you as soon as possible. The type of information they’ll eventually want to get includes:
– A list of debts and creditors
– Monthly income and expense details
– Interest rates and credit card details
– A list of assets and their value
– Problem areas
The purpose of this information and the goal of the counselor is to prepare a plan of attack for getting you out of debt. In addition, they may recommend that you attend various seminars relating to personal finance and managing money.
If you’re very deep in debt, the counselor may go a step further and steer you toward a debt management plan where they’ll negotiate with your creditors to reduce your payments.
Question #3: Will I work with one credit counselor?
It would be unusual to work with multiple counselors. If the agency says there will be more than one, ask why.
Question #4: What fees do you charge for your credit counseling services?
The one thing never to do is give a credit counseling agency any money before they’ve answered all your questions. And, in fact, many agencies charge very little money if the solution to your debt problem is something that can be handled quickly, such as basic budget counseling.
Where they will likely start charging money is when you participate in a debt management plan. But even then, it shouldn’t be big bucks. Typical fees should be under $50 per month. So if you receive quotes in the $100 or $200 per month range be wary.
Question #5: How will my credit counselor be compensated?
The counselors at reputable agencies earn a salary or are paid an hourly wage. What you should watch out for are credit counselors who are paid based on commissions. That’s because their goal will be get you to sign up for all kinds of services and programs. You don’t want to do business with a company that doesn’t have your best interest in mind.
Question #6: Can you provide me with a copy the credit counseling contract that I will be asked to sign?
A lot of fine print can get lost in contracts. So you should ask the agency to send you over a copy for review. Take your time and read the whole thing. Make sure you understand it and ask questions if something doesn’t make sense.
Pay particular attention to the areas concerning the services they will provide and the fees that you will be liable for.
Question #7: What are your procedures for keeping my personal information secure and confidential?
The last thing you want is for your personal information to end up on the Internet or in the hands of thieves and scam artists. So inquire about their procedures for limiting access to you records.
Now you know how to find a reputable credit counseling agency. Ask the right questions, perform a little targeted research, and also see if they have a Better Business Bureau rating (BBB.org) rating. That should be enough to help you make a decision with confidence.