If you’re looking to get out of debt, you might consider talking to a certified credit counselor. This term can describe a credit counseling agency or an individual who offers credit counseling services. As a result, you want to make sure that you’re working with someone you trust. Here’s what to look for when seeking credit and debt help.
Certified Credit Counselor Defined
A certified credit counselor is an individual or agency verified by an independent organization as a credit advisor. Becoming certified credit counselor involves completing coursework and passing an exam.
Certified credit counselors typically help consumers with:
- Creating and reviewing household budgets.
- Evaluating debt and creating a debt payoff strategy.
- Offering advice on improving credit scores.
- Bankruptcy and foreclosure counseling.
- Home-buying advice.
A counselor goes over your overall finances to help identify the cause of credit and debt issues. They also make plans to address those issues.
Some credit counseling agencies also structure debt management plans. They may negotiate payoff plans with reditors, help streamline monthly payments, and reduce interest rates. Instead of paying creditors directly, you pay the credit counseling agency a set amount each month. The agency then distributes that money to your creditors. You follow the plan until all debt is paid off.
There are for-profit and nonprofit credit counseling agencies. For-profit agencies charge a fee for their services. Non-profits may charge fees, but they may be lower. A nonprofit’s main source of revenue may come from grants.
How to Become a Certified Credit Counselor
A certified credit counselor requires certification by a recognized agency. There are two organizations offer that certification: the National Foundation for Credit Counseling (NFCC) and the National Association of Certified Credit Counselors (NACCC).
A credit counselor certified by the NFCC as an individual must be employed by an NFCC member agency. So the NFCC can certify employees of a member credit counselor. But it can’t directly certify employees of non-member organizations. The NFCC offers certificates for credit, housing and student loan counseling, as well as financial education. Once you’re certified, you have to renew your certification every two years to maintain it.
NFCC member agencies must also be certified by the Council on Accreditation (COA). The COA offers accreditation to credit counselors that adhere to a strict set of industry standards regarding for credit and debt counseling.
The National Association of Certified Credit Counselors allows you to enroll in credit counseling certification as an individual or as a group. The coursework is instructor-led, taught online, and costs $600 to complete ($650 with course materials.. Topics include problem-solving, banking and credit basics, debt collection, bankruptcy and consumer credit laws. Once you complete the course, you can apply to take the credit counselor certification exam.
This exam must be completed at an approved testing site with an approved proctor. You won’t pay anything for the exam but you will have to pay a proctor fee, which is based on who proctors the test and where you take it. The test itself consists of 100 multiple-choice questions and you have to get a score of at least 70% to pass.
If you pass, you can receive your credit counseling certification. From there, you just have to complete 16 hours of continuing education every two years and pay a $100 renewal fee to get re-certified.
Why Work With a Certified Credit Counselor?
If you’re struggling with debt, a certified credit counselor is just one option for help. You can also get help from debt settlement or debt relief companies. In extreme cases, a bankruptcy attorney can assist you. However, unlike credit counselors, these individuals may lack certification for credit counseling services.
Consider seeking someone who’s completed the coursework, passed the exam and is accredited as a credit counselor. They can offer professional advice, look at your financial situation, and put their experience toward creating customized plan.
If you’re feeling overwhelmed by debt, counselors offer outside perspective. They can tell you what choices to make with your money.
How to Find a Certified Credit Counselor
If you’re considering credit counseling, here are a few tips for finding a reputable agency or individual:
- Check their accreditation. Look for credit counselors that are certified by the Council on Accreditation or the Financial Counseling Association of America.
- Contact the NFCC and the FCAA for recommendations for credit counselors. Both organizations offer a free locator tool on their websites to help you find certified credit counselors in your state.
- Ask about fees upfront. Specifically, determine whether the agency or individual operates on a for-profit or non-profit basis and what fees they charge.
- Get a rundown of counseling services. You might need counseling for a specific type of debt, such as credit cards or student loans. Or you may need something more comprehensive that covers your entire financial picture.
- Read the fine print on any forms that require a signature. Don’t agree to anything without reviewing the terms first.
- Watch out for credit counseling scams. If they won’t tell you their fees, makes big promises, or ask for money up front, proceed with caution.
The Bottom Line
Credit counseling can help you get a better grip on your finances but it’s important to understand what a certified counselor can and can’t do for you. For example, a credit counselor can help you work out a plan for repaying your debt but they can’t offer a quick fix for increasing your credit score by 100 points overnight.
However, asking the right questions can help you find a credit counselor to work with and ensure that you have realistic expectations about what you can achieve.
Credit and Debt Management Tips
- Credit counselors don’t offer in-depth advice on things like investing or planning for your long-term financial goals. For that, you may want to talk to a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
- Remember that there are certain actions you can take to repair credit yourself before hiring a credit counselor. For example, you can review your credit reports from Equifax, Experian and TransUnion to check for errors. If you spot an error or inaccuracy, you can dispute it for free through the credit bureau’s website. This can help remove or correct errors, which could improve your credit score.
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