Debt Consolidation

There are credit counseling agencies that rescue people from the deepest financial holes. There are also credit counseling agencies that just shovel in more dirt. How do you tell them apart?
by Joel Walsh

Signs of a Reliable Credit Counseling Agency

__Better Business Bureau Membership
The service's website should have a BBB logo and a link to their record on the Better Business Bureau website. Click through the link to check that there are no unresolved complaints against them. Many people only think about the Better Business Bureau after they've been cheated, but by then there's not much you can do. Working with a credit counseling agency that is a member of the Better Business Bureau means that you can go to them to help mediate any dispute you might have with the service provider.

__Accreditation
Reputable credit counseling services will be accredited by an independent nonprofit, just as many schools are. One such accreditation body is the National Institute for Financial Counseling Education.

__Fees
A good credit counseling agency will charge a small, reasonable monthly fee, usually around $30. Some also charge a fee upfront, though this fee should be reasonable (around $50 tops). It may be possible to get a hardship waiver of these fees if you truly do not have the $30-50.

__Clear Application
The application must clearly say what the fees to be paid are, what the services to be provided are, and in what timeframe all of this will be provided.

__Reasonable Promises
Run far, far away from any organization that proposes to "wipe out" your debt for you, rather than simply helping you to repay the debt. Short of your creditors just deciding to forget about the debt (unlikely), there is no way to erase debteven bankruptcy leaves a huge mark on your credit report for ten years.

True, your car may not go missing from your driveway if you stop paying unsecured debt (i.e., debt that is not "secured" with collateral, like most credit cards, unlike most auto loans). But you are still legally obligated to pay the debt, and the possibility of being taken to court will loom over you. You will likely be unable to get even "bad credit" financing if you still have debts in collectionsgood luck buying a car or house.

Not Necessarily Signs of a Reliable Agency
XX Nonprofit Status
Nonprofit status is essentially a tax designation, not a government endorsement of a group's mission. There are plenty of near-fraudulent credit counseling agencies that are registered nonprofits.

XX Respectable Name
Any group can put words like "National," "Alliance," "Assistance," and other trust-inspiring words in their name. But a name is just a name. Make sure to check any organization against the list above to make sure they're reliable. Also try searching for the group's name on a search engine. Don't just look for a lack of negative reportsthat might just mean the group changed names recently. Instead, look for positive reviews from real people, and preferably mention on reputable third-party websites, such as news sites.

Ready to find a credit counseling agency? You're in the right place: the web is full of credit counseling agencies. Just use the checklist above, and you'll have no trouble separating the saints from the scams.

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