Saturday, May 26, 2012, AM | Leave Comment
First off, credit counselors are not debt settlers. There are many debt settlers who would represent themselves as credit counselors. They would represent themselves as sheep but deep down they are wolves who will talk to you for one simple and sole reason and that is to get as much money as possible out of your pocket. Their fees is so high that it alone will get you deeper in debt you are trying to seek help for.
What’s a Credit Counselor?
The job of a certified credit counselor is many folds:
- Advise you on managing your money as best as possible;
- Because you’re in debt and you seek help, credit counselor offers solution to your debt problem;
- Develop a plan to suite and fulfill your requirements and help you prevent future difficulties;
- Most credit counselors charge low fees – to the tune of $20 a session.
Credit counselors in the shape of debt settlers are falling all over themselves to help you out of debt, but some do more harm than good. When and if you need credit counseling, always look for genuine and legitimate agencies that are, one way or another, approved by the U.S. Department of Justice.
Beware and be warned…
Over the years, especially the last couple of years, there has been a bombardment of advertisements in every kind of media, from individuals and companies, offering their services as credit counselors but watch out. In reality they are debt settlers who are after your money.
Beware and be warned that there have been cases about not-so-legitimate companies that you should avoid.
Instead of “repairing” their credit and debt, some of these individuals and companies have, outright, deceived the American public. They have taken the money from innocent people and run with it.
So, in those cases, the debt has remained with the innocents. On top of that, they have lost whatever they had in their saving accounts.
The worst are not credit counselors at all. Usually billing themselves as specialists in “debt settlement,” they promise to help you get rid of your debts for pennies on the dollar – after you pay an upfront fee that can be $3,000 or more.
Do you really need credit counseling?
If you are able to pay your bills and are current on all your accounts, you almost certainly don’t need credit counseling.
If your interest rates are too high, you usually can negotiate a lower rate with your credit-card companies just by asking them – or threatening to move your account elsewhere.
Here is when you might think about your need to a full-scale credit counseling:
- You can’t pay the minimums on your credit cards;
- You are consistently late paying one or more of your regular bills;
- You are being hounded by creditors and collection agencies;
- Your efforts to work out reasonable repayment plans with your creditors have failed.
Help is just around the corner
List of Credit Counseling Agencies Approved by U.S. Department of Justice. When in doubt, ask questions.
National agenda for financially responsible behavior by National Foundation for Credit Counseling (NFCC). Knowing the difference can make all the difference.
Make sure that the credit counselor you choose is a member of the Association of Independent Consumer Credit Counseling Agencies (IACCA).
All credit counselor companies are supposed to be nonprofit organizations. Figuring out whether a nonprofit firm has for-profit ties is no easy task.
First, consumers should pull the company’s tax return, or Form 990, from Guide Star, an online database of nonprofit organizations.
Form 990 should list the top vendors with which the company does business.
Then consumers should check the companies’ business filings with the Secretary of your State, which should list chief officers and directors, and see if any of the names appear on more than one company’s record.
Check for any complaints outstanding against the counselor
So, you did your research and you chose a credit counselor. Occasionally, it so happens that the credit counselor may not have been straight with other clients.
The following are some extra checks you can do:
Search the Better Business Bureau (BBB) database for a company’s records. To help others, please report industry abuses to BBB.
Call the state Attorney General’s office to check for previous complaints against the company.
Check with the local Chamber of Commerce.
To help others, please report industry abuses to the Federal Trade Commission (FTC).
Something to be aware of…
Most of the debt settling services’ fees are paid by the lenders themselves (credit card companies and such), which send back to the services a portion of the payments received.
This has led some critics to charge that credit counseling is just a tool of the lending industry.
In a Nutshell
Typically, credit counseling services don’t negotiate with credit-card companies and other lenders. They are there to advise you and help you make a plan how to manage your finances in the future.