Do You Need a Credit Counselor?

By Francine L. Huff
Mortgage Credit Problems Columnist

You know you have bad credit and need help with debt consolidation and learning to budget your money. A credit counselor can help you clean up your finances and work out a debt consolidation plan. Here's what you need to know about choosing a credit counselor to work with.

Do Your Homework

Make sure any credit counseling agency you're thinking of working with is reputable and really interested in helping you. Ask if the agency belongs to a professional organization such as the National Foundation for Credit Counseling. You can find out if there have been any complaints about the credit counselor by checking with the Better Business Bureau or your state attorney general's office.

Get the Help You Need

Some credit counselors offer a range of services that can help you. Others simply try to get you to sign up for their debt management plan so they make money on the fees. A debt management plan allows you to set up a  debt consolidation plan by making monthly deposits to the credit counselor, which will then pay your various creditors over a period of time that could last three to five years. Make sure any agency you choose spends enough time going over your finances to set up a personalized plan instead of just steering you to a cookie-cutter debt management plan.

Advantages of Debt Management Plans

There are advantages to using a debt management plan. Such a plan can:

• Allow you to reduce interest rates and eliminate late fees
• Possibly save up to 57% on monthly payments
• Allow you to consolidate unsecured debt into one payment.

Look for free and low-fee credit counselors. Some counselors will charge hundreds of dollars in upfront fees for their services but you can avoid high fees by shopping around and comparing agencies. And scrutinize non-profits just as closely as other services. Several firms have had their non-profit status revoked for using it to dodge consumer protection laws.

Sources
Care One Credit Counseling
DebtAdvice.org

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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