Ten Questions to Ask When Selecting a Credit Counselor

When selecting a credit counselor, you have a lot of choices. Thanks to the increased indebtedness of the average American household and changes in the Federal Bankruptcy Code, there are literally thousands of consumer credit counseling services from which to choose. With that in mind, why settle for anything less than the best?

But if you're like most Americans, you don't know what exactly constitutes a good, reputable credit counselor. The important thing is to shop around until you find a company that can answer the following 10 questions to your satisfaction.

1. What Services Do You Offer? Legitimate credit counseling agencies are educators first and foremost. According to the Federal Trade Commission (FTC), you should steer clear of any credit counselors that do not offer budget management and savings classes, and only try to push their debt management and consolidation plans on you.

2. Do You Offer Free Educational Information for Me to Review? As educational entities, credit counselors should provide free information for you to peruse before making a decision to hire them. The FTC says to avoid credit counseling companies that charge for information.

3. What Are Your Fees? In order to make a wise choice, you need to be fully informed of any and all fees the credit counselor charges. Make sure you ask if there are any additional set-up or monthly fees, and ask for a specific price quote in writing.

4. Do You Offer Assistance for Low-Income People? Many credit counseling companies are not-for-profit organizations that will not turn you away based on your inability to pay. If you are unable to afford credit counseling fees, make sure to ask. If the credit counselor won't help you, look elsewhere.

5. Will I Have a Contract? Make sure you are protected! Insist on a contract and make sure you get all verbal promises in writing. If the credit counselor provides you a standard contract, tell them that you want to take it home and read it - few people actually read contracts while sitting across the table from the other party. Make sure there isn't anything fishy in the fine print.

6. Are You Licensed to Offer Your Services in My State? Few will answer no to this, so ask for some form of proof. Don't be embarrassed - just say that you've "heard a lot of things on the news about credit counselors" and you "just want to make sure." If the credit counselor is insulted by this or can't provide proof of his legality, then you should obviously look elsewhere.

7. What Are Your Qualifications? The best credit counselors are accredited or certified by an outside body. Don't fall for phony certifications from within the company - look for truly qualified professionals to help you get back on track.

8. What Are Your Information-Security and Privacy Policies? Be sure that your information will not be sold to other businesses, and that the credit counseling company will do everything within its power to keep your information confidential and secure.

9. How Are You and Other Employees Compensated? Ideally, you should be looking for credit counselors who are paid hourly wages and are therefore not incentivized to push products and services on you that you may not need. In reality, this is rarely the case, but you still need to know and understand how the company's employees are paid.

10. Will You Help Me with My Long-Term Finances? Again, legitimate credit counselors are educators - they aren't in business simply to pocket fees from your current dilemma. In fact, credit counseling is supposed to be for people who have not yet fallen into debt but want to avoid it. In practice, however, few people seek out help until they're already in trouble, and thus, many of the less reputable credit counseling firms do not offer services for once you get back on track. Asking this question is another way to weed out the bad guys.

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