Three steps to choosing a qualified credit counselor

Whether you need debt management or are just looking to create a budget, credit counseling can provide the tools you need to take control of your finances.

Whether you need debt management or are just looking to create a budget, credit counseling can provide the tools you need to take control of your finances.

Thousands of credit counselors across the country work to help people learn to manage their finances — though some are more reputable than others.

Finding an experienced, qualified credit counselor can mean the difference between financial empowerment and winding up worse off than when you began. Here’s how to choose a qualified credit counselor:

1. Know what you want — and how to find it

Before reaching out to a credit counseling agency, write out your financial problems and goals and identify the most important ones.

All certified credit counselors can help you with simple budgeting, and that type of general advice is free. But you may require one with specialized training if you have a specific goal, such as homebuyer education, debt management, bankruptcy counseling or managing student loans, and those services carry fees.

There are two key resources for finding credit counselors:

• The National Foundation for Credit Counseling is the nation’s largest nonprofit financial counseling organization. It offers a localized search tool that can help you find an affiliated agency nearby with specialists who are right for your financial situation. You also can find and contact many NFCC-certified agencies through NerdWallet’s Ask an Advisor platform, or call 800-388-2227 to be automatically connected to the NFCC member agency closest to you.
• The U.S. Department of Justice has its own search tool to help consumers find a credit counseling agency. This list is limited to agencies that provide bankruptcy counseling, but many provide other services as well, and all are vetted by the federal government.

Many credit counseling services are available over the phone, making it easy to get financial advice even if there isn’t a credit counseling agency in your area.

2. Understand the qualifications

“Qualified credit counselors are certified by either the National Foundation for Credit Counseling or the Association for Financial Counseling and Planning Education,” says Becky House, director of education and communications for credit counseling agency American Financial Solutions.

Credit counselors affiliated with the NFCC and AFCPE meet stringent standards of certification that seek to ensure a uniform standard of quality.

Say you’re looking for housing counseling before purchasing a home, for example. Counselors at NFCC-affiliated organizations must complete a six-step certification process administered by the NFCC to work with the agency and then have to complete a specialized certification process called NeighborWorks from the U.S. Department of Housing and Urban Development.

ClearPoint Credit Counseling Solutions, GreenPath and Money Management International are three leading credit counseling agencies, all of which are accredited by the NFCC.

If an organization is not affiliated with the NFCC or AFCPE, check whether it’s accredited through the Council on Accreditation, a not-for-profit organization that gives its stamp of approval to social service organizations that demonstrate a commitment to helping consumers.

Once you find a credit counseling agency that seems trustworthy, check the Better Business Bureau to see if there are any complaints from consumers.

3. Take your time

“Don’t make the decision of which credit counselor to choose in a hurry,” says Bruce McClary, spokesman for the NFCC. “Take time to investigate the organization that you’re going to be contacting. Otherwise, you may end up in the hands of someone who’s not working in your best interest.”

You may be tempted to settle on the first credit counselor you speak with, but don’t rush into what could be a long-term partnership. Run through these steps with each credit counseling agency you’re considering:

• Call the agency and set up a preliminary meeting or phone call with a counselor (which should always be free).
• During the meeting, ask about the counselor’s experience, qualifications and approach to working with clients. Be thorough, and ask as many questions as you need to understand how he or she can help you meet your specific financial goals.
• See if you feel comfortable with the counselor during the meeting or if you feel pressured to sign up for services you don’t want or fully understand.
• Understand the costs of any program you do sign up for.

“A good credit counselor will listen to your situation and help you craft a plan that suits your needs,” House says. “They understand that one size does not fit all when it comes to finances.”

Be wary of for-profit companies that promise quick fixes for your credit and debt. Joy Gaddis, a credit counselor with ClearPoint, says many of them charge higher rates than their nonprofit counterparts, and they may have predatory programs that offer short-term solutions that end up hurting you in the long run.

Companies that present themselves as “credit doctors” are a good example of this. They’ll dispute every negative mark on your credit report, but if the claims hold up, you’ll be right back where you started — minus whatever money you paid them.

Next steps

Choosing a credit counselor that’s right for you involves understanding what you want, knowing how to spot qualified credit counselors and having the patience to make an informed choice. Years of small decisions have likely led to your current financial situation; take the time you need to make this next decision right.

No matter your financial situation, you can gain a lot from meeting with a qualified credit counselor.

“If you find yourself to the point where you’re wondering whether you need credit counseling or not, you probably do,” McClary says. “You can always benefit from financial advice from a professional, and you don’t have to sign up for a service. Just to have that hour to review your budget, it’s worth it to make that call if you connect with a trusted nonprofit agency.”

Sean Pyles is a staff writer at NerdWallet, a personal finance website. Email: spyles@nerdwallet.com. This article first appeared at NerdWallet.