Posted by The TaxAdvocate Group, LLC

Tips to Select a Credit-Counseling Agency

Tips to Select a Credit-Counseling Agency

For everyone with debt that has spiraled up to almost 50% of their entire take-home pay, it is essential to get some help about this. 

Even though such a situation is pretty painful, there are options. One such option is to work with a credit counseling agency. However, you need to be meticulous in choosing such an agency. 

Your choice matters a lot because a reliable credit counselor can help with repayment of your debt at a better interest rate, avoid bankruptcy and get you a workable budget. On the other hand, an unreliable credit counselor can leave you with high fees and make you worse off. 

Here are tips that can help you:

  1. Try Self-Help First

No matter how reliable and trustworthy a credit reporting agency is, their services are not free, and some might require ongoing fees. Without any help, you might get a lower interest rate and have a pretty reasonable repayment plan all by calling your creditors. You might also settle down to work out a realistic budget and commit to it. 

However, if you doubt your ability to stick with this budget, getting outside help might be a good choice. Such assistance is inevitable if you have tried the steps above without success.


  1. Stay Away from Debt-Settlement Companies and Credit-Repair Clinics

You will get hope-inspiring and bold TV commercials with a promise to erase your credit from credit repair companies completely. Debt-settlement companies will tell you that they will help you settle your debts, penny for dollars. 

Bear in mind that such companies charge excessively without any tangible help. In most cases, they provide services that people can do themselves. Worst still, some companies might charge exorbitant fees upfront and disappear.


  1. Avoid Committing to the First Counselor You Contacted 

Make sure you talk to many debt companies about what they can do for you, alongside their charges. You can reach dozens of such debt companies online. Also, consider visiting the Better Business Bureau webpage to view complaints launched against any agent. 

Also, check with the state’s attorney general’s office or consumer affairs department.

  1. Know Exactly the Content of Your Counseling 

A reputable counselor will discuss your financial situation, develop a customized approach, and support you at every step. Reputable agencies will offer budget counseling for debt management. 

However, it would be best if you questioned the reliability of a counselor who simply asks you to fill an application. Your counselor’s training level also matters. In addition to a college degree, courses and certification in saving, investment, budgeting, finances, etc., matters.


  1. Request their Payment Structure

Ideally, you want an agency that receives most of its income from creditors via "fair share." This means that the creditors will give the agency a share of the money you pay them. 

However, if their fee structure is an essential factor in their services, you should look elsewhere. Also, avoid agencies that make you pay a percentage of your entire debt as up-front fees as well.


  1. Be Sure about Debt-Management Plan

Stay clear of agencies that force a plan on you before reviewing your financial situation. Careful analysis of your situation reveals that you might not need such programs. When such an agency educates you, you might control your finances and get your debt under control. 

In addition, such a plan might affect you in many ways. For example, using or getting a new credit might be impossible while the project is in place.


  1. Watch out for Errors

If you consent to a debt-repayment plan, the agency might advise you to stop paying your debt and direct the consolidated payment to the agency. This could be a good idea as far as your agency agrees to the debt plan.

However, if the agency does not pay the bills on time, you might face a late payment penalty which will impact your credit score. 



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