How to choose a credit counseling agency: ten tips

If you find yourself unable to pay your debts, it might be time to look into a credit counseling agency. However, it pays to do your homework before deciding to go with a particular company. Here are ten tips to help you get started down the right path.

1. Ignore what’s on TV

If you watch TV for an hour during the day or late at night, you’ll probably see at least three commercials for some form of debt counseling, management or relief agency. Ignore them all—these are usually for-profit companies concerned only with their own interests; whether or not you get back on your feet doesn’t even matter to them. Many are outright scams; nobody at the cable company is really investigating the commercials they run. As long as somebody pays, they’ll run the ads.

2. Nonprofit only

Make sure any credit counseling agency you use is a nonprofit. There is no reason to go with a for-profit credit counselor. To be safest, stick with those with at least 10 years in business.

3. Check the BBB

Check out any agency with the Better Business Bureau before you contact them. Stick to those with A or A+ ratings; there are plenty of these, leaving no reason to go with a B, C or D-rated company.

4. Make sure they are accredited

Check out any agency with either the Association of Independent Consumer Credit Counseling Agencies (AICCCA) or the National Foundation for Credit Counseling (NFCC) before working with them. These associations have strict guidelines for membership.

5. Find out about fees

Depending on what your needs are, many agencies do charge some form of fee. However, these should be in the $50 – $100 range at most. Anyone asking for thousands of dollars is running a racket.

6. Ask lots of questions

You need information, sure, but you also need to get a sense of who you’re dealing with. Even if you already know some of the answers, ask lots of questions anyway. If they’re evasive or give brush-off answers without explaining things, that’s a red flag. Move on.

7. Ignore offers to erase, reduce or repair

There is no legal way to remove accurate negative information from your credit history. If you go into credit counseling, your rating is going to take a hit for a while. That’s just part of the deal. But anyone offering to reduce your debts or erase your credit history is probably running a scam.

8. Don’t give them your information first

An agency that is unwilling to give you free information about their services without you first revealing personal details is to be avoided.

9. Talk to others

You probably know someone who’s already been through this. Talk to them. Find out if they had good or bad experiences with an agency.

10. Take your time

Don’t rush into making any decisions on credit counseling, and avoid agencies that pressure you. These are important decisions, and while it’s going to be great to eventually get out from under your debts, things can be less than ideal in the short term; you want to make it as easy on yourself as possible. Falling into a scam or getting ripped off will only make things worse. Proceed with courage, but proceed with caution!

National Protect Your Identity Week is October 17-24, 2009

Actually, shouldn’t every week be Protect Your Identity Week?

Snide remarks aside, PYIW is apparently an awareness initiative by the National Foundation for Credit Counseling. I’ll let them describe their organization (from their website):

Founded in 1951, the National Foundation for Credit Counseling (NFCC), Inc., promotes the national agenda for financially responsible behavior and builds capacity for its Members to deliver the highest quality financial education and counseling services. The NFCC is the nations largest and longest serving national nonprofit credit counseling network, with more than 100 Member agencies and nearly 850 offices in communities throughout the country. Each year, NFCC Members assist more than 3.2 million consumers, helping many to drive down their debt and take control of their finances.

Consumer Credit Counseling Service of Northwest Indiana is a member of this organization. They are one of the good ones—no misleading claims, true nonprofit structure, no insane promises, and an A+ rating from the BBB.

So, how to celebrate Protect Your Identity Week? Had I found out about this sooner, I would have set up some live presentations or something. But hey, if you hear about any bangin’ PYIW parties, be sure to keep me in the loop, ‘kay?

Credit Repair Scams

They’re out there.

They’re waiting for you.

They say they want to help you. They say they can fix your less-than-perfect credit history.

What they really want is to rip you off.

Big time.

First off, it is important to know that there are legitimate agencies that can help you get your financial situation back on track. I’ll talk about some of those later.

However, there are also a lot of agencies looking to help themselves to your cash. Here are a few things to remember:

  1. You should never pay an upfront fee for any type of credit counseling service. This is a major warning sign that they are up to no good.
  2. They must (by law) provide you with a copy of your rights as a consumer. This tells you what you may and may not do in regards to your credit history. If they do not provide this information, it is another warning sign.
  3. If your credit history has accurate negative information, it’s there to stay for seven years (ten for bankruptcy). There is no legal way to have it removed. Are they offering to delete records of a credit card you actually defaulted on? Warning sign.
  4. If there are mistakes on your report, know that you can correct them yourself for free. If an agency is trying to keep you from contacting a credit bureau yourself, that’s…you guessed it: a warning sign.
  5. It is illegal to try to create a new Social Security number or Employer Identification number for the purpose of creating a clean credit file. It doesn’t work, and it can get you into far worse trouble (we’re talking about the kind of trouble that could involve handcuffs and mugshots).
  6. Check out any credit reporting agency with the Better Business Bureau before you even consider using their services.
  7. The minute they use the term “piggybacking,” walk away. It doesn’t work. Warning sign.
  8. There are advertisements everywhere for credit repair services—email messages, on the radio, even on television. I’m just going to throw this out there: ignore them all. Maybe some of them are legit, but many are not. Do your own research and make your own decision. A flashy commercial that makes big promises is a definite (say it with me) warning sign.
  9. Legitimate credit counseling agencies are non-profit organizations. Every single one of them.

So…now that you know how to avoid a scam, where can you go for legitimate credit couseling?

REGIONAL Federal Credit Union works with Consumer Credit Counseling Services of Northwest Indiana (, a non-profit agency. REGIONAL partners with CCCSNWI because they’re trustworthy, and they do exactly what a credit counseling service should do.

You can also find information about legitimate services nationwide from the National Foundation for Credit Counseling ( They don’t work with scammers.

As always, before you use any credit counseling service, check them out with the Better Business Bureau ( If they’re not BBB accredited, and if they don’t have a pretty spotless record, look elsewhere.

Personally, I’d never use an agency that had anything less than an “A+” rating.