Is Credit Counseling Right for You?

If you are struggling with debt, credit counseling could help you get back on your feet—but you need to do your research first.

It can be hard to ask for help. A lot of people feel that asking for help is a sign of weakness. In reality, recognizing that you need help and seeking it out is a sign of maturity. You and your friends and family will all be better off if you’re financially stable with help than in financial trouble without it.

Credit counseling can be one such kind of help. Credit and debt can already be confusing on a good day, so it’s really easy to get bogged down once you’ve found yourself in a financial swamp. If you find yourself struggling to get by, relying on short-term bad credit loans (like payday loans, cash advances, and title loans) to make ends meet, then it’s definitely time to ask for help.

That’s why we’re here to help you find out if credit counseling is right for you.


What is credit counseling?

Would you like some khachapuri? The answer to that question will probably depend on whether or not you know that khachapuri is a delicious Georgian cheese-bread dish.

Much like khachapuri, you won’t be able to decide if you want or need credit counseling if you don’t know what it is. So what is it?

Credit counseling officially started in 1951, when the National Foundation for Credit Counseling was founded to promote financial education and certify credit counselors to carry out that goal.

Credit counselors can look at your financial situation and offer advice on how to improve your credit, craft a budget, and pay down your debt. They can help you build up an emergency fund, so that you don’t have to rely on short-term no credit check loans and bad credit installment loans to bridge unexpected financial gaps.

For people with poor credit who are constantly racking up debt through credit cards and personal loans, credit counselors can provide them the help they need to get back on their feet.

If you’re struggling with your finances, a credit counselor could be a great option, but you have to make sure you talk to the right one.

Finding the right credit counselor.

Anytime you’re looking for a solution to credit or debt problems, there are going to be scammers trying to take advantage of you. That’s why you need to be careful when seeking a credit counselor.

Todd Christensen, education manager for Money Fit by DRS, Inc. (@MoneyFitbyDRS), offered a guide to how you can find a credit counselor worth trusting:

  • “First, make sure you are considering a credit counseling agency that offers debt management (full debt repayment) and not a debt counseling agency that offers debt settlement (promoting just 50 percent debt repayment).”
  • “Confirm that the agency is a nonprofit, 501(c)(3) organization.”
  • “Check with one of the two main industry trade groups, such as FCAA.org, to ensure the agency is a member. Trade associations promote and monitor best practices.”
  • “Counselors should be certified to offer financial and debt counseling.”
  • “Look up the agency’s rating with the BBB. Don’t work with anyone with a poor rating. A+ is best. The agency is likely to have complaints, but look for one that is responsive and willing to resolve customer concerns.”
  • “Contact the attorney general in the state where the agency is headquartered. Ask if there are any past, current, or pending lawsuits against the agency.”
  • “Check with the agency in your state that regulates credit counselors to ensure the agency is registered. It may be the department of finance, banking, financial institutions, consumer affairs, or even the secretary of state.”
  • “If the agency is listed under the Department of Justice’s Office of the US Trustee site, it means they offer at least bankruptcy certificate counseling/education in addition to just debt management. It also means they have had a federal regulator review their business practices and policies.”
  • “If the agency does nothing but direct you immediately to a debt management plan, consider finding another agency. Counselors should first help you work out a household budget and figure out your current debt situation.”
  • “Never respond to an email or telephone solicitor. Legitimate credit counseling agencies abide by best practices that prohibit unjust activities.”

Of course, it’s not just enough to find a credit counselor who is legitimate. You also want one that’s right for you.

“After that, look for an agency that matches your preferences,” advised Christensen. “Would you prefer to meet in person, by phone, or correspond by email or online? Do you feel you can make a personal connection with the counselor?

“You are going to be sharing some very confidential information, and you need to feel comfortable in doing so. Is the agency available during the hours you need it? Consider agencies with early morning and/or evening hours.”

What are some other options?

While a credit counselor can be very helpful, it may also not be the ideal situation for you. Maybe your creditors aren’t willing to work with a debt management plan. Or maybe your financial situation is beyond what the credit counselor can handle on their own.

If it’s the latter case, a good credit counselor will direct you towards further action you can take. One of those actions might be talking to your creditors and seeing if there’s some sort of deal you can work out with them directly.

You should also consider reaching out to friends and family for help. While that personal connection might make it even more difficult than reaching out to a credit counselor, it’s still better than financial floundering. And it’s certainly better than turning to a two-week online loan for help.

If your situation is dire enough, bankruptcy may be the best option, but you should do your research beforehand.  Seeking financial assistance isn’t fun. But languishing under debt is worse.

To learn more about how you can improve your financial situation, check out these other posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Contributors

Author and Accredited Financial Counselor®, Todd R. Christensen, MIM, MA, is Education Manager at Money Fit by DRS, Inc. (@MoneyFitbyDRS), a nationwide nonprofit financial wellness and credit counseling agency. Todd develops educational programs and produces materials that teach personal financial skills and responsibilities to all ages. Having facilitated nearly two thousand workshops since 2004 on the fundamentals of effective money management, he based his first book, Everyday Money for Everyday People (2014), on the discussions, tips, stories and ideas shared by the tens of thousands of individuals and couples in attendance.

The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.