Choosing a credit counselor is no small decision. After all, if the two of you succeed, you’ll be changing your financial life forever.
Asking the right questions can help you find the right one for you.
To prepare, list your financial goals, such as getting out of debt or creating a monthly budget, and gather financial documents on your income and expenses. Then call each credit counseling agency you’re considering, with the following talking points in mind.
1. What are your qualifications?
Most preliminary conversations with a credit counselor will happen over the phone. Use this call to learn about the qualifications of the counselor and her organization.
Accreditation through these organizations means that the counselors at a particular agency meet certain standards of training and education. If the agency isn’t accredited by one of these organizations, ask about the individual counselor’s experience and training.
Some for-profit companies promise quick fixes for your credit and debt. But they may charge higher rates than nonprofits and offer short-term solutions that end up hurting you in the long run.
2. How can you help me reach my financial goals?
Many credit counselors specialize in areas such as student loans, bankruptcy counseling and homebuying. Before you get too deep into a conversation with a credit counselor, ask if he has the right training to help you with your specific situation.
3. What do your services cost?
Simple financial counseling, such as about creating a budget, should always be free — no matter how many meetings you have. In most cases, the counselor will send you a detailed packet outlining your budget free of charge.
But signing on for services such as student loan counseling, debt management programs and pre-homebuying classes will carry a cost.
Prices vary from one service to the next. Debt management plans, for example, have a one-time startup fee that is typically capped at $50. There are also regular monthly costs for the duration of your service, typically three to five years, that vary depending on your financial situation. Other services, such as student loan counseling, will cost you for each session.
Compare costs among a few agencies to look for a good price. Get the costs of any recommended services in writing before agreeing to them.
4. How do you provide your services?
Consider ahead of time whether you want to receive credit counseling services in person, over the phone or online. Then ask the counselor whether she can accommodate your preference.
The majority of credit counseling sessions — whether for bankruptcy counseling, student loan questions or general questions — take place over the phone or online. This makes counseling accessible wherever you are.
You can also meet with a credit counselor in person, though you may have to wait for an opening in the counselor’s schedule.
5. How are these services funded?
Nonprofit credit counseling agencies receive compensation from grants, creditors and often credit card issuers to fund their services.
While it may seem counterintuitive, these relationships with creditors are a win-win. Creditors benefit from having their customers pay back their debt, and this funding source in turn makes the services more affordable for consumers compared to alternative, for-profit agencies.
Ask the credit counseling agency you’re talking with if it receives compensation from outside organizations. This makes you aware of any conflict of interest and brings transparency to your relationship.
6. How will your services affect my credit scores?
Before you sign up for any service with a credit counseling agency, talk through how the program could potentially affect your credit scores in the short and long term.
Going on a debt management program, for example, can temporarily hurt your credit scores if accounts are closed. In the long run, though, your credit scores are likely to improve if you follow the advice of a credit counselor. A good counselor will be able to give you details about what to expect in your particular situation.
7. How often will we work together?
Some consumers have ongoing relationships with their credit counselors. Others meet with their counselors only once or twice. Ask the credit counselor how you two will work together in the short, medium and long term to help you achieve your financial goals.
Your credit counselor will be your partner in achieving your financial goals, so don’t hesitate to interview more than one before choosing any program. After your initial phone conversations, take time to think over your choice. You want to pick a counselor you're comfortable with and who offers the right options for your situation.
Whether you’re considering a debt management program, are about to enter bankruptcy counseling or just want to create a household budget, these seven questions can help you choose the right person to guide you along the way.
Sean Pyles is a staff writer at NerdWallet, a personal finance website. Email: [email protected].