Searching credit counseling agencies may bring up hundreds of options, and most of them are legitimate services that are dedicated to helping their clients with money problems. But knowing what to watch out for when looking for a reputable credit counseling agency is important.
When searching for a credit counseling agency, here are some tips to look for:
Accreditation and Status
Most reputable credit counseling agencies are nonprofit organizations that help you manage your debt, build a realistic budget, and strengthen your financial literacy through free educational materials and workshops. With legitimate organizations, the counselors should be certified and trained in consumer credit. Two of the largest accrediting bodies are the National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA), so looking for one of these affiliations is a good way to find a reputable agency.
Red Flags
Reputable credit counseling agencies don't charge upfront fees, and their initial counseling and educational resources should be free. Be wary of any organization that demands payment before providing services or promises to erase negative information from your credit report or significantly reduce your debt. If it sounds too good to be true, it probably is. Other red flags include advising you to stop paying your creditors or asking for personal financial details before sharing basic information about the organization and its services. Additionally, while debt management solutions are a legitimate way to pay off debt, steer clear of any organization that only offers a DMP or pushes you to enroll in one before they have a solid understanding of your finances.
Finally, make sure you know how to distinguish a certified nonprofit crediting agency from for-profit debt settlement companies that typically charge high fees and often advise you to take measures that put your credit score at risk.
Questions to Ask
The Federal Trade Commission (FTC) recommends asking specific questions when searching for a reputable credit counseling agency:
- What services do you offer? Any legitimate organization should offer a variety of services.
- Do you offer information? If they charge you for educational information, find a different agency.
- What are your fees? While accredited nonprofit credit counseling agencies typically charge a small fee when you enroll in a debt management plan, typically $25–$50 on a monthly basis, most of their services should be free.
Additionally, the FTC advises checking the qualifications of your counselor and the confidentiality of your information.
Bottom Line
Reaching out for help with debt takes courage, and the agency you choose can make a real difference in where you end up. Take the time to compare options before you commit to one. Look for a nonprofit agency with recognized accreditation and certified counselors and ask plenty of questions. If an agency pressures you or makes promises that sound too good to be true, keep looking. A reputable credit counselor will take the time to understand your full financial picture, explain all of your options, and help you build a plan that fits your life.