Looking for a Credit Counselor? Here’s How to Find a Good One

Looking for a Credit Counselor? Here’s How to Find a Good One article image.

Credit counseling can help you improve your financial life by teaching you ways to efficiently pay off debt and create a budget that works for you. While guidance from a professional credit counselor can benefit anyone, it can be especially helpful for those who are struggling with credit card bills, battling bankruptcy or feeling buried in debt.

"When someone meets with a certified credit counselor, they get expert advice for overcoming their most urgent financial challenges," says Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling (NFCC). "Consumers benefit from a comprehensive review of their entire financial situation. Every counseling session is completely confidential with advice that is uniquely designed for each individual."

Follow these steps to find the right credit counselor for your unique financial situation.

1. Decide What You Need to Work On

Certified credit counselors offer services such as credit report reviews, budget advice, mortgage counseling, student loan counseling, bankruptcy counseling and referrals to other helpful financial resources.

To effectively compare the services offered by various agencies, take inventory of your finances before you start your search. Write down the major financial obstacles you're dealing with, as well as your goals for the future. Not only does figuring this out beforehand help you narrow down your search, but having this information handy will make it easier to clearly explain your struggles and desired outcomes to your counselor once you meet.

If you're feeling overwhelmed by the thought of analyzing your debt, you're not alone. Taking an honest and in-depth look at your financial situation is the first step to gaining control.

2. Find Reputable, Accredited Counselors Through a Counseling Organization

Avoid unaccredited or for-profit companies by starting your search with one of these credit counseling organizations, which connect you with reputable and certified credit counselors only:

  • The National Foundation for Credit Counseling (NFCC): Start your search with the NFCC, the nation's largest nonprofit credit counseling organization. Each of its member agencies is certified through the Council on Accreditation.
  • The Financial Counseling Association of America (FCAA): The FCAA is a national association that links consumers to member agencies that meet the organization's standards for quality financial services. Keep in mind, however, that the FCAA works with both nonprofit and for-profit agencies. You should closely examine the fees charged by any credit counseling agency you're thinking about working with, especially if it's a for-profit company.
  • The U.S. Trustee Program: The U.S. Department of Justice maintains a search tool you can use to find a credit counselor. You can filter by state as well as language spoken. Each agency listed has been vetted by the program. Each firm listed through this service provides bankruptcy counseling, but many also offer other credit counseling services.

After you've narrowed your search to a few candidates, check the reputation of each through your state's attorney general's office or local consumer protection agency. Run a search for any complaints against the agency through the Better Business Bureau as well.

3. Set Up a Preliminary Meeting

Create a shortlist of two or three reputable agencies you may like to work with and schedule information-gathering meetings with each. Consider it a red flag if an agency asks you to pay a fee for this first meeting, and seek help elsewhere.

Your goal in the meeting is to gain a clear picture of what they'll offer you and how much they'll charge. Here are a few questions to help you get to know the agency:

  • How much does it cost to work with you? Many of the resources a credit counselor offers should be free. If an agency tells you that all information, even basic budgeting advice, comes at a price, the agency should be avoided. Your counselor may suggest a debt management plan, which is a more involved plan for those in serious credit card debt and usually comes with an upfront fee as well as a small monthly service fee. Get a price quote or breakdown of all service fees in writing before you agree to work with an agency.
  • How can you help me reach my long-term goals? A good counselor won't just offer quick fixes for your problems, but will also help you come up with a plan for achieving your long-term goals and tracking your progress over time.
  • How do you protect my personal data? Ask the agency if they ever sell any of your information, including your address, financial information or phone number.

4. Watch Out for These Major Red Flags

While legitimate credit counselors can be an invaluable resource, beware of credit counseling scams, which can make your financial situation worse. Often, they'll claim they can help you tackle your financial problems but will instead take advantage with false promises, ineffective practices or overpriced services. Common warning signs include:

  • Pushing a debt management plan as your only option: These plans shouldn't be viewed as the only possible solution. If a counselor pushes you to sign up for one before you've gone over your finances together, this is an indication that the counselor isn't offering you personalized help.
  • Withholding key information: An agency should provide you with any information you request about its pay structure, services and fees. If you feel like a credit counselor isn't telling you the whole truth, don't move forward. Wait until you fully understand what you're signing up for before you agree to anything, and always ask for information in writing.
  • Miracle claims and "credit repair doctors": Does a counselor promise results that sound too good to be true, like instant debt erasure or an overnight 100-point credit score increase? If a company you meet with starts making claims like this, avoid giving them your personal information and look for help elsewhere.
  • Paying their employees on commission: Avoid credit counselor agencies with a commission-based pay structure. Compensating counselors extra for pushing paid services on you creates a clear conflict of interest. Your counselor's bottom line should be your financial success.

The Bottom Line

The right counselor can help you create a successful budget, devise a plan to pay down debt and learn how to save money for your future. Just be sure to work with an accredited and legitimate credit counseling organization whose bottom line is helping you improve your financial situation.

If you're working to get your finances back on track, be sure to keep tabs on your credit health as well. Check your credit score for free through Experian so you know where you stand.

How Good Is Your Credit Score?

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