Finding The Right Credit Counseling Firm

No one enjoys financial trouble. It's stressful and embarrassing. The most promising routes out of debt – debt settlement or debt negotiation – often require skills that most individuals don't feel like they possess. Good information about debt settlement is hard to find and debtors often feel like they're going it alone against corporate financial giants.

Credit counseling can provide valuable services to individuals in financial trouble, but most people wait too long to ask for assistance. Is credit counseling worth the trouble? How can you find a reputable credit counseling firm to help you with debt settlement or debt negotiation?

First, it's always preferable to negotiate or settle your debts than it is to declare bankruptcy, or even let an account go into collections. If you're concerned about your credit report – and you should be – a negotiated debt or a settlement will indeed make a negative impact on your credit. The mark won't be as negative as a bankruptcy or an uncollected debt. Information about a negotiated debt will remain on your credit report for seven years, while bankruptcies will stay on your report for ten years.

Second, when you determine that you want to look for a credit counseling firm for assistance, look for agencies that are members of the local Better Business Bureau or a national body of credit counseling firms. Ask if the agency is accredited, and if so, by whom. Avoid "self-accredited" firms. You want to find a firm that has been accredited by an independent third party. Before handing over any of your personal information, verify that the firm's credentials are in order.

Look for a 501(c)(3) non-profit organization that's based in your community. Ask about their fee schedule, and avoid firms that want to be paid in full up front. Some firms charge a set-up fee and an on-going monthly fee. These aren't unusual, but the fee schedule should be reasonable. Monthly fees that exceed $25-$50 aren't reasonable.

Ask how much of your monthly payment will be applied to your credit balances, and how you will know that your debts are being paid. Ask if the agency offers consumer education classes. If they don't, steer clear of the firm. Ask for a written plan that shows how long it will take to resolve your debts. Depending upon how much you owe and how much you make, eliminating your debts could take as many as five years.
Credit counseling can be an excellent way to help you resolve your debts, as long as the agency you use is reputable and offers a reasonable way for you to meet your credit obligations. You'll also find many firms that will take advantage of your situation, so use extreme care when selecting a credit counseling firm.