Evaluating a Consumer Credit Counselor

Many Americans feel they’re destined to struggle with their debts all alone. But they shouldn’t. In fact, agencies exist specifically to help borrowers with debts understand their financial situations and options.

Can an advisor really help borrowers better their personal finances? According to research cited by the FDIC, consumers who work with credit advisors “have statistically significant improvements in debt reduction” compared to those who aren’t counseled. What can credit counseling do for borrowers? 

The study outlines a few potential benefits:

• Bring more awareness to the reality of household finances
• Help boost financial literacy for more informed decision-making
• Boost support and accountability while managing personal finances
• Use debt management to favorably change the “composition or cost of debt”

Reaping these potential benefits from consumer credit counseling starts with choosing the right person.

Here are some tips on how to go about evaluating a credit advisor.

Know Your Debts & Needs

It’s difficult to find a well-matched professional if you’re not even sure what you hope to gain from your sessions. Be prepared to communicate your challenges and goals. The more you can tell a potential advisor during an initial consultation, the more closely you can see whether he or she aligns with your needs.

This is a time to get specific. Do you need help with general budgeting and reducing credit card debt? Are you specifically looking for pre-bankruptcy counseling? Are you in need of assistance when it comes to avoiding home foreclosure? Are you a viable candidate for a credit card consolidation strategy?

Vet Agency and Counselor Qualifications

Another facet of choosing an effective advisor is vetting the qualifications of that person, and the agency the person represents.

A good rule of thumb is to start your search using a database of industry accredited agencies. For instance, agencies that are certified as members of the National Foundation for Credit Counseling must pass annual audits and operate according to strict standards. For example, such agencies must do an in-depth review of each borrower’s financial situation before enrolling the borrower in a debt management program. This ensures that consumers get the most from their experience, while helping to weed out scam companies.

After checking out an agency’s credentials, you’ll also want to interview any prospective counselors about their work experience and professional qualifications. These candidates should have no problem providing this information early on in your conversation, whether or not you agree to enroll.

Make Sure It’s a Good Match

On a more personal level, you also want to make sure you feel comfortable communicating with that person. As NerdWallet advises, you want to make sure an advisor is a good fit for your needs and goals. So, be sure to ask about their approach to working with clients.

Use the initial free consultation as a barometer to determine how well you’ll get along with this person and how well you believe they can help you with your financial situation.

Consider How Much You’ll Pay in Fees

While the first meeting should be free, you may face fees if you decide to enroll in a debt management or debt consolidation program with them. Avoid nasty surprises down the line by asking about any and all fees up front. Evaluating a consumer credit advisor means doing your research on the process, the agency, the individual, and their fee structure before signing anything.