Before seeking a Credit Counseling service, of course, first try to fix your credit yourself if your credit needs ‘fixing’ so-to-speak, that is by far a better route to go.

You can start by calling the creditor(s) you owe– yourself: banks, credit card companies, department stores—to see if they have an in-house program to help you put into place a debt-reduction program with more affordable monthly payments.

Even if they don’t have an in-house program, you can still ask to speak to a person in charge who can discuss this with you so that you know what options are available to you. However, if after you still feel you need some professional help, then read on.

You must be very careful and do due-diligence to make sure it is a correct step for your situation. If you decide it is, then you must make sure the agency you pick is legitimate, and a true “non-profit.”

Legitimate Nonprofit Consumer Credit Counseling Services

Legitimate non-profit consumer credit-counseling services can provide much-needed help. On the one hand, you get counseling and education, and then they help you manage and repay your debt. A reputable agency focuses on providing you with information and classes not only on collecting information about your debts and informing you as to how much to repay monthly. They also offer debt management plans, which can help get you out of debt faster by consolidating your payments and/or reducing your interest rates.

To qualify for non-profit status, agencies are supposed to offer education and counseling services. Though know that an agency being “non-profit” does not guarantee legitimacy, you must still do thorough due-diligence so that you get the help that you need.

Nonprofit Credit Counseling Agencies are required to provide certain information to you, including fees, services offered and how the agency is funded. They’re also subject to state and federal regulations designed to protect you. For example, nonprofit credit counseling agencies must have a written agreement with each client that outlines the terms of the relationship. Both you and the counselor must sign this agreement, and they are required to provide it to you before any services are rendered.

In addition, nonprofit credit counseling agencies must disclose their fee structure to you upfront. This way, you can make an informed decision about whether or not to use their services. Either way, make sure that what they recommend as a program for you will help your credit score not harm it in the long run.

Ask lots of questions. That may seem obvious, but many people do not ask any questions as to the entire program and its ramifications. It is hard when you are worried, but you must be practical and not emotional, so that you can maintain clarity and know what you are agreeing to. Ask how their counseling services may impact your credit scores. Get the facts. All information should be disclosed to you upfront.

How to do your due diligence

After a program has been recommended to you, then take time to think it over before making any commitments; do not sign documents there at the office.  Also, before signing with an agency, make sure your creditors are willing to work with that organization.

Take all documents home with you and take time to review all paperwork given to you so you don’t make a hasty decision, and have time to process what you have been told. Do not let anyone persuade you into making a decision then and there.

Here are some more tips on what you should look for when selecting a reputable consumer non-profit credit counseling service:

• Check the company through the Better Business Bureau where you can find information about the company’s business practices, and of there has been any consumer complaints about the company.
• See if the credit counseling agency is “government approved”. The Department of Justice maintains a list of approved credit counseling agencies. In order to become government approved, credit counseling agencies have to be non-profit, bonded and in compliance with applicable laws. The company must also provide detailed information about their experience, counselor training, fees and more.
• The agency should also be a “certified consumer credit counseling service.” See if the agency belongs to the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Members of both associations are all accredited agencies with certified counselors, are required to limit the amount of fees they can charge, and must follow specific standards (see Notes below).
• The Federal Trade Commission can also provide you with information on choosing a legitimate non-profit credit counselor.
• Check with your State Attorney General’s Office to find out if the company have any pending legal investigations against them.
• The counselor should create a plan tailored to fit your personal circumstances—they should not just give you generic advice. And often an experienced counselor will spend close to an hour reviewing your financial situation, prior to making recommendations, and will then offer follow-up sessions on a regular basis.
• The consumer credit counseling service should offer formal written contracts and provide free information about the consumer credit counseling services to be performed. They should describe (1) any and all fees due and payable by you; (2) payment terms and total cost; (3) how long it will take to achieve results; (4) any guarantees; and (5) the counselor’s name, business name, address and all contact information.
• Beware of agencies that ask for your first monthly payment to cover their fees, high monthly service charges, or “voluntary” contributions. Any more money paid by you will reduce the amount of your money available to pay off your debt.
• Ask about further education: What kinds of fees (if any) are charged for any additional financial literacy services (budget counseling, retirement planning, and the such)? Is there a free initial consultation?
• Once you do sign up with a company, review the service’s report of your payment plan regularly to ensure your payments are going the creditors to reduce your debt. Cross-check with your creditors to make sure the counseling agency is paying your bills on time. Not only will you avoid penalties and late fees, but you must always protect yourself and manage your money.

How does debt reduction affect your taxes?

People are often blindsided by the tax implication of debt forgiveness. If you owe a creditor $10,000 and then settle the debt for $3,000, here’s what happens as far as the IRS is concerned. The IRS considers this to be the same as if that creditor had written you a $7,000 check, which you applied to your outstanding debt. Therefore the amount that is forgiven will show up as taxable income to you (federal and state) for that year, in addition to your other sources of income.

National Foundation for Credit Counseling

The National Foundation for Credit Counseling (NFCC) is a nonprofit organization that provides financial education and counseling services to consumers to help them make informed decisions. Founded in 1951, the NFCC is the nation’s oldest and largest provider of credit counseling services. Each year, the organization helps millions of consumers improve their financial well-being through its network of more than 600 member agencies. The NFCC’s certified financial counselors provide confidential, one-on-one counseling to help consumers identify and solve their financial problems.

In addition, the NFCC offers a variety of services, including credit counseling, debt management plans, and financial education courses. Its counselors are certified and trained to provide unbiased advice based on each individual’s unique circumstances. The agency also offers an online self-help center, which provides articles and tools on topics such as budgeting, credit repair, retirement planning, and avoiding scams.

The NFCC’s website also provides a directory of nonprofit credit counseling agencies that are members of the NFCC that you can use to find an NFCC-certified agency in your area where you can get free or low-cost counseling services.

Association of Independent Consumer Credit Counseling Agencies

The Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national non-profit organization that represents the interests of its member agencies. It was founded in 2002 in response to the growing need for quality credit counseling services. Member agencies are committed to providing high-quality services to their clients and to promoting financial literacy.

AICCCA members are independent, non-profit organizations that provide free or low-cost credit counseling and financial education services to people who are struggling with credit card debt, student loan debt, and other forms of unsecured debt. The organization provides support and resources for its member agencies, which include financial education, advocacy, and industry research.

AICCCA’s mission is to promote financial wellness for all consumers by advancing the quality and availability of credit counseling and financial education services. In order to achieve this mission, the association works to educate policymakers about the importance of credit counseling and financial education, advocate for laws and regulations that support the provision of these services, and provide training and resources to member agencies to help them improve the quality of their services.

In addition, the AICCCA provides accreditation for member agencies, which ensures that they meet high standards of quality and ethics. The association is widely recognized as the leading voice for credit counseling agencies, and its members are committed to helping consumers achieve financial success.

Through these efforts, AICCCA strives to ensure that all consumers have access to the tools they need to make informed financial decisions and lead financially healthy lives. It is a valuable resource for consumers who are struggling with debt, and it is an important voice in the fight for consumer protection.

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