What’s it like to work with a credit counselor? How do you find one (and how do you know if you’ve found the right one for you)? If you’re just learning about the credit counseling process, then perhaps you’re already pondering these questions. Credit counselors typically organize into agencies, but ultimately the attention that you receive to improve your financial health is individual—and personalized.
Working with a credit counselor is an interactive experience that requires time, attention to detail, and follow-through by everyone involved. If you’re committed to getting out of debt, then keep reading to learn more about finding and working with a credit counselor.
Who are credit counselors?Credit counselors are highly skilled professionals who specialize in helping individuals to manage their debts, including by budgeting and supporting their financial literacy. Many credit counselors hold certifications like the Certified Credit Counselor designation from the National Association of Certified Credit Counselors.
Many credit counselors have college or advanced degrees in fields like finance and accounting. Credit counseling may also be a second career—it’s not uncommon for a credit counselor to have a prior track record in a related part of the financial services industry. You want a credit counselor who has a broad range of knowledge and extensive, battle-tested experience.
When working with a credit counselor, you can expect them to focus on developing and implementing a plan to manage and repay your debts. If you’re entering a debt collection process, your credit counselor will help you create a formal debt management plan (DMP) and obtain approval from your creditors. Credit counselors are instrumental in the development, formalization, and implementation of such DMPs.
Negotiations with creditors. You can usually rely on your credit counselor to conduct negotiations with creditors and debt collectors for you. This can be a huge relief as well as a time-saver.Budget planning. A realistic and sustainable budget is typically a key component of your debt management plan, which is why credit counselors are usually experts at budget planning.Financial education. Your credit counselor will help you learn about pertinent financial topics—a long-term move aimed at enhancing your financial literacy and preventing similar money problems in the future.Credit improvement. If your goal is to boost your credit score, you can work with a credit counselor to analyze your credit report and create a customized strategy.Specialized credit counseling. You can find credit counselors who specialize in student loan counseling, mortgage counseling, and the credit counseling that’s mandated as part of a bankruptcy.Community referrals. You may be eligible for financial assistance from community organizations; your credit counselor can help you discover which ones.Nonprofit vs. for-profit credit counselingCredit counselors typically organize into agencies, which can more efficiently comply with the regulations put forth by state laws and the Federal Trade Commission (FTC). The clearest difference among credit counseling agencies is that some operate for profit and others exist to serve the public good.
For-profit and nonprofit credit counseling agencies have many similarities, including their primary goals, core services, and how they’re regulated. The differences include their financial objectives, funding mechanisms, and pricing of services.
Specialized services. You can expect to work with any credit counseling agency to create a budget and manage your debt, but specialized services like debt settlement and loan consolidation may be available only from for-profit agencies.Funding sources. Grants, donations, and nominal service fees are the typical funding sources for nonprofit credit counseling agencies. For-profit agencies generally charge higher fees that are billed directly to clients.Business registration. Nonprofit credit counseling agencies are frequently registered as 501(c)(3) nonprofit organizations, while for-profit agencies may use any for-profit business structure, such as a corporation.Regulatory oversight. Both types of agencies are governed by the FTC and relevant state laws, but nonprofit credit counseling agencies must also comply with the rules for 501(c)(3) entities.Accessibility. Not every credit counseling agency operates everywhere. Some geographic regions may lack nonprofit agencies.How to find a credit counselorIt’s important to find a credit counselor who is accessible and who gets you. Here are some strategies for getting started:
Peruse the DOJ database. The U.S. Department of Justice maintains a database of “approved” credit counseling agencies. You can search by location, language, and even keyword.Tap into agency networks. The National Foundation for Credit Counseling and Financial Counseling Association of America both connect you with networks of credit counseling agencies to help you find the right provider. Conduct a local search. You can search for accredited counseling agencies in your area using the Internet and help from local community organizations. Your state’s consumer protection division may publish a list of accredited credit counseling agencies.Ask for referrals. If you know others who have worked with a credit counselor, then you can ask for referrals. Just make sure to vet the credit counselor against your own requirements.The bottom lineWorking with a credit counselor creates a relationship that may endure for many years, so your choice of credit counselor truly matters. You need someone who takes a personalized approach and always keeps your best interests in mind. You don’t need the stress of pushy sales tactics, and you should definitely feel comfortable with the pricing structure. You’ll know you’re working with the right credit counselor if you feel fully supported throughout the debt collection process.