Tuesday, May 18, 2021

Choosing a debt counselor
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.

Scott Bilker

Scott,

I am interested in finding out about credit counseling...an overview of what it entails and how to choose a person or organization. Questions to ask and what to look for. I need outside, ongoing help with changing my habits in regard to money. Your help is much appreciated.

Heather

Heather,

Choosing a to use credit counselor is serious decision. I always recommend self-help, however, I do understand that this course may not be possible for everyone. My feeling is that even if you are successful with credit counseling you will be left with your finances to deal with on your own.

It is true that there are some good credit counseling services, but it's also true that many can be trouble! They may be able to get better rates from your creditors, but not always. If you decide to use credit counseling you have to monitor them frequently to make sure that they're doing their job. (See Chris Peruzzi vs. the Debt Counselors.) 

Red Flags
1) Upfront payments and high fees. Costs of more than $50 per month. Of course, it's fine to pay fees for counseling IF they can get results that exceed their costs! 
2) Be sure that "voluntary" fees are really just that. 
3) Hard sell. If they're reading from a script and aggressively pushing counseling. 
4) No written plan. Your counselor should create a detailed plan for your approval prior to starting their services.
 
Finding a good counselor 
1) Check with the Better Business Bureau.
2) Ask for references. 
3) Remember that "non-profit" status does not guarantee quality service. And I, as well as the IRS, question many of these companies so called "non-profit" status. 
4) Ask about privacy. Make sure your information isn't sold or distributed to anyone. 
5) Shop around. Talk to 2 or 3 agencies before signing up. 
6) Don't sign up until you know that the counselor has contacted all your creditors and what the deal will be when the counselor is working with them. This should all be in writing. 
7) Ask about how credit counseling affects your credit report or score. Some creditors do disclose to credit reporting agencies information about a customer's participation in a debt management plan, this won't necessarily have a negative effect on your ability to get credit in the future, but there is a chance that it can. Talk with the counselor about these details. 
8) Get referrals from people you trust! I do recommend a few counseling agencies as long as I don't hear any complaints. I've set up a feedback system to allow you to let me know how you're being treating. This way I can keep my recommended counselors in check. I have researched their backgrounds and feel that they can do a good job. Of course, you should always shop around to make sure that you're getting the service! You can find out more at the DebtSmart Help Center.

Good luck and please let me know what happens!

Regards,
Scott


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