Selecting a Legitimate Credit Counseling AgencyReviewAdvice

How to Choose Credit Counseling Agencies

Enrolling with a credit counseling agency is a choice which can have a tremendous impact on your financial health and purchasing power. Individuals in need of a credit counseling agency typically have a rocky credit history due to credit card debt, unpaid bills, and other forms of unsecured debt. This type of track record is reflected in what's known as a FICO score, which is calculated using information found in your credit report.

A FICO score is the most commonly used scoring tool lenders and other institutions utilize to determine a person's creditworthiness. These scores fall on a spectrum between 300 and 850, with 300 being poor and 850 being excellent. A reputable credit counseling agency is one which works diligently to improve your credit through budget counseling, debt management planning, and other credit-related services. According to the Federal Trade Commission, you're best bet is to work with an agency that is non-profit based and available for in-person appointments.

Why Is This Important?

First off, let's clarify what a non-profit status indicates, or more specifically does not indicate. This does not mean that the agency's service will be free of charge but what is suggested is that the organization is using the revenue earned to carry out their goals or initiatives as opposed to distributing profits out to shareholders. Of course, there are organizations which label themselves as "non-profits" but still employ deceptive practices so it's your responsibility to adequately research their financial history and any claims made against them.

How to Choose Credit Counseling Agencies

Do Your Homework

Two agencies that specialize in providing information on the legitimacy of organizations like credit counseling agencies are the state Attorney General's Office and your state's consumer protection agency. Another important component to check is the organization's licenses and accreditations. The Association of Independent Consumer Credit Counseling Agencies is the largest national association that represents non-profit counseling companies. The National Foundation for Credit Counseling and the Better Business Bureau represent other reputable sources for information regarding credit counseling.

Evaluate the Services

Apart from the organization's financial repertoire and accreditation, the next area of importance when selecting a credit counseling agency is their offerings and services. You should evaluate your personal needs in relation to the services they offer. For example, would you benefit from access to additional educational programs and resources? Do you get to speak to a qualified representative or receive a free consultation before signing-up? Are you assigned a counselor for the duration of your enrollment period that will keep track of your progress and manage your debt management plan? All of these are important inquiries to be clear on before making your decision.

Don't Forget About Fees

Some credit counseling agencies are notorious for entrapping customers into a program with hidden fees. You have to be extra careful to read all the fine print as well as the terms of the contract before signing up with just anyone. On average, the fee to organize a debt management plan should not exceed $50. Of course, if you're getting additional services on top of that you'll probably be charged separately for these. The biggest lesson to take away from this is to get all fees disclosed up front and have a clear cut plan of what the counselor intends to do for that sum.

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