How to Choose a Credit Counseling Service

The agency you choose should be accredited by a reputable association. Most non-profit consumer credit counseling agencies will hold an ISO 9001:2008 registration, which illustrates the agency’s commitment to quality, customer satisfaction, and continual improvement of their services.

Do you adhere to an industry code of practice?

A reputable service will usually adhere to the Association of Independent Consumer Credit Counseling Agencies (AICCCA) code of practice. Also check the service’s Better Business Bureau listing and rating.

How long has your agency been providing these services?

Experience counts when it comes to financial counselling. Check to see how long they have been in business.

Are your counselors licensed and certified?

Reputable consumer credit counseling agencies will ensure that their counselors obtain, and maintain, the appropriate certifications. Common certifications include the Association for Financial Counseling and Planning Education (AFCPE), and the Partnership for Financial Education.

What are the qualifications of your counselors?

Counselors can have one or several certifications depending upon their area(s) of expertise. Many consumer credit counseling agencies provide a variety of services and need to have appropriately certified counselors for each. Look for details at their site about their team or staff.

Can you provide references?

Most legitimate companies should be happy to provide testimonials and references. Check, which provides consumer reviews of the agencies and other important details about them. Look up companies like GreenPath or Cambridge Credit Counseling Corp. to get an idea of what the listings look like, and how people find it working with these companies.

Is your bankruptcy counseling approved by the U.S. Department of Justice?

If the consumer credit counseling agency offers bankruptcy counseling services, be sure that they are listed as an approved agency by the U.S. Department of Justice Executive Office of United States Trustees (EOUST).

Any agency claiming to be an approved agency should have this listed on their website, and be listed on the DOJ site. Only approved agencies can legally provide bankruptcy counseling services, which are an essential part of being allowed to file for bankruptcy. After filing, those who have declared bankruptcy will also have to take a debtor education course.

For example, GreenPath and Cambridge are both listed on the DOJ site:

Ask these questions to ensure that you get a credit counseling service which is legitimate and right for you.

There are a number of different areas of credit counseling that might be right for you. It is a question of how much debt you have, and the nature of that debt.

Common debts include:

  • Credit card/store card debt
  • Mortgage/housing-related debt
  • Student loan debt

Some consumer credit counseling services may offer debt management and/or debt settlement. Some will also offer bankruptcy counseling.

Before You Choose a Service

Before you choose a service, gather together all relevant financial paperwork for three to six months if you have it available. If not, start saving all finance-related paperwork going forward. Make copies of your pay stubs for rent or mortgage bills, utilities and so on. The counselor will need all of this information in order to help you come up with a plan to pay down debt, and stay out of debt. They will also need this if they offer debt management and you are carrying a high level of debt.

Credit Card Debt

If you have a large amount of credit card debt, you will need the name of the credit card company, your account numbers, your amounts owning, due dates and interest rate. Organizing these into a spreadsheet using your most recent statements can save a lot of time.

Medical Debt

Current estimates show that more than 65% of all bankruptcies filed in the US are related to medical expenses. You may have used a credit card, or taken out a payment plan through the doctor or hospital you have been using. Some debt management/settlement programs can include medical bills as part of their service, but it is important to ask in advance.

Mortgage/Household-Related Debt

Many people start to get behind with their mortgage due to changes in interest rates if they haven’t taken out a fixed-rate mortgage. Others might lose their job or have unexpected expenses, such as medical expenses.

Most credit counselors will tell you to do whatever you can to avoid becoming homeless. They will also assure you that the banks would rather have people living in a house and doing their best to pay their mortgage, than an empty house.

Some people get tempted by refinancing offers, which are supposed to let you tap into the value of the house (equity) which you have been accumulating by paying your mortgage each month. However, a lot of these offers come with high fees attached and a process similar to what you went through when first buying the house in terms of assessing its value.

This can be a tedious and expensive process which is really moving from one mortgage company to the next. You might do better to stick to your existing mortgage lender, especially if they are just down the road from you and you can go in to speak to them face to face any time you need to.

Student Loan Debt

Student loan debt often piles up for the simple reason that many college grads often find it difficult to get a job as soon as they are out of the school. The loan deferment term differs from lender to lender, but is usually 9 months to a year.

The amount borrowed also has a significant impact on how easy it will be to pay it back. Students who went to a 4-year college will usually have much less debt than someone who has gone to medical school, for example.

Even if a grad gets a job, it’s not always easy to learn how to budget. Credit counseling can help with all this.


Bankruptcy is a huge decision with many repercussions. Consulting with a credit counselor can help you get a clearer picture before trying to file, with all of the legal and other complications that involves.

Credit cards seem like such an easy way to pay for everything – online, over the phone, and in person. You don’t have to fiddle for cash; all you have to do is swipe or insert the card so the machine can read the chip. In most cases, you don’t even have to sign for your purchases. Some credit cards are simply tap and go.

All of this is amazingly convenient, but it is also very easy to lose track of what you are spending, and end up maxed out on one or more of your cards.

Rewards for Shopping

In addition to the convenience of a credit card, companies often offer special rewards and incentives for using their card. Things like air miles, cash back, or points in their gift mall may seem like a good deal, until you consider that studies have shown that people who use reward cards tend to spend an average of 4% more than those using regular cards. Unless you travel a lot, your best deal is cash back, and monitoring your spending.

Another good deal might be a Upromise card linked to a 529 educational savings account if you have children and are planning to send them to college. The card will give you money back, and also register extra money back when you buy Upromise-approved products, such as in the supermarket. You can also invite friends and family to link their cards, for instant rewards.

Note: any money saved in the 529 account will be taken into consideration when it comes time to determine your child’s financial aid, but only if the account is in your name. See if you can get an aunt, uncle or other relative to open the account and then you can all contribute without it affecting your child’s financial aid package.

Attitudes to Money

Some people are very casual about cash. If they have it, they spend it. If not, they live on Ramen noodles for the rest of the month.

One of the main driving factors for spending is emotional. It might be to keep up with what others have. It could also be that you work so hard, you feel you deserve a little treat. Look at all of the credit card ads with smiling, happy people going on vacation, dining out, or buying their dream item. It’s easy to get tempted, and that is exactly what the credit card companies are banking on.

The Offer That Is Too Good to Be True

The 0% APR offer for X months is a common lure credit card companies use to get new customers. It can be bad for a number of reasons. The credit limit and fixed term often tempt a person to use the full amount offered, treating it like “free money” because they don’t have to pay it back at the end of the month. They estimate they have, for example, a year to pay the bill. But what happens as the year draws to a close, and all the accumulated interest will fall due unless the full amount is paid in time?

A second reason these offers are too good to be true is that every time you sign up for one, it shows up as an inquiry on your credit report. Too many will lower your credit score.

A third reason is that having more than one card makes it easy to lose track of your spending and the amount of time you spend paying bills and juggling payments. The simpler, the better when it comes to finances.

Credit counseling can open your eyes to all the tricks of the trade. Then it is up to you to avoid temptation.

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