• Loans and Credit

Introduction: How to Choose a Credit Counselor



Living paycheck to paycheck? Worried about debt collectors? Can’t seem to develop a workable budget, let alone save for retirement? If this sounds familiar, you may want to consider the services of a counselor.

Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But beware – just because an organization says it is "nonprofit" doesn’t guarantee that its services are free or affordable, or that its services are legitimate. In fact, some credit counseling organizations charge high fees, some of which may be hidden, or urge to make "voluntary" contributions that cause them to fall deeper into debt.

Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, hous- ing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

Amendments to the FTC’s Telemarketing Sales Rule prohibit for-profit credit counselors who sell debt settlement and other debt relief services on the phone from charging work with you to solve your financial problems. But beware – just because an organization says it is “nonprofit” doesn’t guarantee that its services are free or affordable, or that its services are legitimate. In fact, some credit counseling organizations charge high fees, some of which may be hidden, or urge consumers to make “voluntary” contributions that cause them to fall deeper into debt.

Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling or collecting a fee before they settle, reduce or alter your debt. If you do business with a for-profit debt relief company, you may be required to put money in a dedicated bank account, which will be administered by an independent third party. See Settling Your Credit Card Debts for more information.