6 Tips for Working with Credit Counselors

6 Tips for Working with Credit Counselors

Buried under unpaid credit card bills? Tired of running away from credit collectors? Worried that you’ll never get out of this financial problem, especially when each month brings more interest charges and bigger, and more overwhelming, debt?

One way to solve your credit card problem is to consult with a credit counselor. He can help you take charge of your credit problem, by pointing out options you didn’t know you had, and working out a money management system. Here are some things you need to know.

1. How can a credit counselor help me?

A credit counselor analyzes your finances and then helps you create a financial battle plan. He will look at your income, your monthly expenses, and debts. He may help you review what areas you overspend, and identify areas where you can cut back so you have more money to allocate for debt payments. He can also help you create a bill tracking system. In some cases, your credit counselors can also craft a repayment plan, and help you negotiate with your credit collectors.

If you have unreliable or irregular income, your credit counselor may be able to refer you to government employment agencies. If your problem has deeper roots—like emotional spending, or an expensive addiction like gambling—he may also help you look for relevant counseling.

2. How do I find the right credit counselor?

You’ll find thousands of credit counselors in the yellow pages, your community directory or the Internet. However, it’s important to look for a credible, reliable and experienced professional. One way to do that is to approach a well-established agency with a portfolio of satisfied clients.

You may also want to visit the Association of Independent Consumer Credit Counseling Agencies and National Foundation for Credit Counseling websites for a list of members. You can also check with the Attorney General’s office or the Better Business Bureau to see if there is any case of complaints filed against the company.

3.What should I ask in the first meeting?

Ask if the credit counselor is certified by a nationally respected, independent organization. Then, ask which clients the credit counselor personally handled, and whether it is possible to speak to them personally about the services they received. Then, inquire about the type of services he offers. Perhaps he can give a proposal of how he would tackle your case. You should be able to know, from the start, that he has equipped with the tools that you need to finally regain financial security.

You should also ask about the payment system. Ideally, your credit counselor should be paid a certain “salary” rather than commissions, since this usually means that you have access to a broader range and larger number of services. To avoid confusion, ask which of these services are automatically included in your personalized plan (and its corresponding fees) and which are considered “add-ons” or “extras.”

4. How much will this cost?

The fees depend on the complexity of your case, the services you require, and the agency you contact. It’s important for you to understand what you get for your money—demand a breakdown of the costs, and of course, do your “window shopping” and compare these to other credit agencies.

If you feel that the cost of hiring a credit counselor is too great, given your financial situation, ask for a lower rate or a waiver on certain fees. You may also want to give them your budget—what can you afford now?—and see if they can create another package of services around that.

5. How do I formalize the agreement?

Once you have reached some kind of an arrangement with your credit counselor, insist on having a formal written agreement or contract. This should detail the services you can expect, the fees for each, and a timeframe. The company’s name, business address, the counselor’s name and contact information should all be in the contract.

6. How do I work with my credit counselor?

Your credit counselor can’t make your debts magically disappear—he can only present strategies and solutions. You still need to “make it happen,” by following the budget that he set, listening to his recommendations, and changing the habits or lifestyles that may be contributing to your financial problems.

So, it’s important to see your credit counselor as a kind of coach, and you as an athlete who is actively participating in the training. Don’t just sit back and expect him to do all the work. Provide him with all the information he needs, and then take the recommendations to heart. It sounds like a lot of work (it is!) but the reward is worth it—financial freedom, finally!