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Choosing a credit counseling service

Having a significant amount of debt can be both financially and personally challenging. Significant debt levels can lead to depression, stress, and can even harm marriages and other personal relationships as well as your motivation to work. When you have a significant amount of debt it is essential to put a plan in place to manage your debt and develop a plan to get rid of your debt.

For those who are financially experienced and savvy, financial experts will commonly recommend developing a personal budget and plan for repaying your debt, as well as keeping charts and amortization tables for your current debt obligations and key debt terms such as interest rate and repayment terms. For those who need additional help, a credit counseling service is greatly recommended. Credit counseling services provide you with professional experience and expertise in managing your debt and help you to get your debt in order. They can help you to formalize a plan to repay your debt in a way that doesn’t overwhelm or put too much stress on your current lifestyle but to gradually lower your debt and put you on a better financial footing in the future.

There are, of course, a lot of different credit counseling service companies out there and selecting the right one can be challenging. To sort through and limit the number that you are planning on considering it is essential to summarize the key factors that make up your debt, income, and expenses and organize it into a chart. Doing so will allow you, and any professional credit counseling company to understand your current financial position and the depth of the challenge you are facing. The goal of this is to find a credit counseling service that is the right size for your needs by offering you personalized care and attention, but at a cost that is beneficial to your needs.

Many credit counseling services may be designed for individuals with very significant amounts of debt or may be experts in removing debt balances through the declaration of bankruptcy. This is, of course, not for everybody and being armed with your current financial situation can help a credit counseling service to aid you in choosing another alternative. If you are certain that you don’t want to choose bankruptcy as your option then choose a credit counseling services that specializes in rehabilitating your debt load rather than declaring bankruptcy.

Find a credit counseling services with a solid reputation and experience that goes back several years. If the firm you are choosing is a sole proprietor then ask to see his personal references and experience and reach out to his references and ask for ways that the individuals were helped. Be sure to interview with the credit counseling service and see how much time they are willing to dedicate to your case and problems. You will want to avoid using a credit counseling service that tries to rush through your meeting as it is likely that they won’t be willing to dedicate a significant amount of time to you in the future. If you are looking for a larger credit counseling service ask to interview several different credit counselors there and choose the one you feel most comfortable working with.

If you have any special types of debt or specific lenders you are dealing with, which may be the case with owners of their own businesses, see whether the credit counseling service has specific experience with this lender and what type of relationship they have with them. Many large lenders will sell their old debt to companies that buy the rights to your debt for fractions on the dollar. These debt buying agencies are willing to accept less than the face value of the debt as it represents a gain on their end from the pennies on the dollar which they bought the old debt for. Having a credit counseling service that is experienced in dealing with the debt buying agency that holds your debt can provide you with a real advantage when trying to negotiate a partial forgiveness of this debt balance.

Consider the cost of the services provided by the credit counseling service. Some work on hourly rates, while others have contracted rates or go pro bono based on the client’s income level. Discuss the terms offered by the credit counseling service and see what type of arrangement you feel comfortable with as you work to reduce your debt load and get set on the path of financial security.

Tips for consumers: Choosing a credit counseling service

Credit counseling services seem to expand in number exponentially every single year. With perhaps dozens to choose from in your area, you might not know how to find the best service. If you don’t choose a reputable agency, however, you may suffer some setbacks. Fraudulent credit counseling services engage in dirty tricks like requesting hefty upfront fees for counseling services, or sharing your personal information — like your Social Security number — with other businesses. If you’re already struggling with debt management or have a dismal credit history, you can’t afford to choose a fraudulent agency.

What are some signs that a credit counseling service is legitimate?


  1. Longevity

If a credit counseling agency has not been in business for at least 5 years, pass it up. In any business, start-ups will need to struggle, and their managers will need to flail before hitting a smooth business stride. By the five-year mark, a credit counseling agency should have a definite business plan, and will have developed a reputation in the industry. This is about the time in a company’s history when you can begin to discern whether that reputation is good or bad.

  1. Accreditation

If a credit counseling agency lacks accreditation, it is not an agency worth your time. A trustworthy agency can prove that it has been accredited by the Council on Accreditation (COA) or the International Standards Organization (ISO). The accreditation must be current, too; these agencies enforce strict standards on an ongoing basis to ensure that consumers are not defrauded by their credit counselors. They should also be members of the National Foundation for Credit Counseling (NFCC) and hold a high rating with their local Better Business Bureau (BBB).

  1. Good References

The degree of notoriety a credit counseling agency has acquired for being disreputable is wholly dependent upon how long the company has been fraudulent, and just how fraudulent it has been. Companies can get away with scams for years – just look at Enron.

Place a call to your Better Business Bureau and your state’s Attorney General’s office to learn more about a credit counseling service that you’re considering. You will find out whether or not that credit counseling service has engaged in shady dealings.

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