When facing high debts, many people first try using a credit counselor before filing for bankruptcy. Here are several tips for selecting the best credit counselor:
- Consider reputation: A credit counselor with a long working relationship with creditors will probably be able to get a better deal for you, so it is better to find one that has been in business for a good amount of time.
- Check for effects on credit: actions you take now with a credit counselor may stay on your credit report for up to 10 years. Talk to prospective credit counselors about how their actions will effect your credit score.
- Beware of high or upfront fees: Carefully read all documents and ask the credit counselor about their fees. Do not pay any upfront fees or high monthly fees.
- Avoid promises of a quick fix: Getting out of debt is a difficult process that can take many months or even years. Don’t believe anybody who says otherwise, and avoid any credit counselor who will not spend a good deal of time planning a better budget for you.
- Ask about other services: A legitimate nonprofit organization will offer budgeting and general credit counseling services for free or a small fee. Beware of those trying to up to you on a debt management plan quickly. Go through all of your options and be sure you are making the best choice.
- Check with the Better Business Bureau: Just to play it safe.
How Can I Tell If a Credit Counselor Is Trying To Scam Me?
Here are the warning signs that you should avoid the credit counselor altogether:
- companies that want you to pay for credit repair services before they provide any services
- companies that do not tell you your legal rights and what you can do for yourself for free
- companies that recommend that you should not contact a credit reporting company directly
- companies that suggest you try to invent a “new” credit identity by applying for an Employer Identification Number instead of your Social Security Number
- companies that advise you to dispute all information in your credit report or take any action that seems illegal such as fraud
Do I Need an Attorney If My Credit Counselor Is Not Legitimate?
If you have doubts about the legality of advice you have received or fear you are being cheated out of money by a credit counselor, consult an attorney immediately. Likewise, if you have unsuccessfully used a credit counselor or wish to skip this step and file for bankruptcy, you should speak with a credit attorney right away.