Evaluating a Credit Counselor

You always hear the stories of people seeking help from a credit counselor. The counselor tells them to stop paying their bills and to not take calls from creditors because they will handle everything.

Time passes and the person finally realizes that their credit situation is worse off now with a credit counselor than it was before they sought help.

Usually, if a solution sounds too good to be true, it is. And in the case of credit card debt, ignoring a creditor will usually get you in worse trouble. So, how do you determine legitimate help from just another company wanting to cash in on your problems?

Here are some tips to help you evaluate a company. And, for starters, always begin your search with the Federal Trade Commission (www.ftc.gov) or the National Foundation for Credit Counseling (www.debtadvice.org) for sound advice from reputable sources.

Ignorance is Bliss: If someone tells you to stop making your monthly payments or answering calls, you better understand what it is that person is doing for you that would allow you to make such bold moves. Usually, going down this path will lead to any even bigger problem recorded on your credit history.

Nonprofits: Just because a company says they are a nonprofit offering credit counseling, it does not mean anything. Beware of companies that make such claims and always do your homework before entering into any such agreement. Always have your guard up and carefully evaluate debt plans rather than trusting someone just because he or she says the company is a nonprofit.

Charges: If a company charges you just to find out basic information, run away fast. Red flags should be raised any time a person or company attempts to charge you just to find out information about the types of services they offer. If you have to pay just to find out what someone is going to do for you, you are being ripped off.

Commission: Find out if the agent you are working with, works off of commission. If that is the case, then beware. Employees that get commission for upgrading you from one plan to the next, may not be out for your best interests. Know when you are being taken and when someone has your best interests in mind.

No More Debt: Companies that promise you the impossible are too good to be true and you should run from those types of businesses as fast as possible. If someone promises to you that they will get rid of all of your debt with the wave of a magic wand, then you are being taken. Remember, your first priority is to pay off debt and to assume responsibility for the charges that you made. If someone is offering to rid you of that responsibility, think twice about just how exactly that person intends to accomplish such a promise.

Also, proceed with caution when someone offers to help you pay off your debt for less. That is another common hook to take advantage of someone. If you have debt, you have debt; the only way to reduce it would be to pay it off.

Plans: Debt management plans are usually good for those consumers who have a lot of debt. What happens is a company will offer to handle all of your payments, while you pay a monthly deposit. That monthly deposit will then be used to go toward the debt. If you find that such a plan is the best option for you, make sure you are aware of the plan and what is required of you. Always proceed with caution and understand a contract before agreeing to anything.

Credit Reports: Anyone who says they will be able to remove negative information from you credit report, is not telling you the truth. Avoid believing such statements.

Accreditation: How to know if someone is legitimate? Look to see if you are dealing with an accredited professional through the National Foundation for Credit Counseling. Accreditation holds professionals to certain uniform, industry standards. Oftentimes, professionals will be required to pass a test in order to be able to say they are accredited.