How to Tell if a Credit Counseling Service is Legit
by JennaOne of our readers, Steve Crowder, sent us this question:
I work in the credit card business and I have read your information on how the FICO score is computed. Good information but too bad that more people don’t get it. There are many credit counselors out there telling people to close out most, if not all, of their credit cards to protect their credit? I am seeing people closing out multiple accounts with wonderful credit histories that go back several years. It would seem that most of these so called credit experts are actually handing out advice that is directly counter to your information and can harm their believers. Is there any entity that monitors or certifies these credit counseling services?
Thanks for your question Steve! As it turns out, yes there are.
Here’s the lowdown:
There are a several organizations that require credit counseling services to go through an independent certification in order to join. The two main ones are the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA).
The National Foundation for Credit Counseling requires that all prospective credit counseling agencies follow all the laws in the area they work in, conform to the NFCC’s own member quality standards, and then they have to be certified by the Council on Accreditation, an independent organization.
The Association of Independent Consumer Credit Counseling Agencies (AICCCA) also requires independent accreditation, and they too, have their own set of guidelines.
So, if you are trying find out if a credit counseling service is legitimate, then look for these clues:
They should be non-profit and they should belong to either the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).
They should also be independently verified by at least one of the following two agencies, if not both:
The Council on Accreditation (COA), or the International Standards Organization (ISO).
You can search for agencies listed with the NFCC here, and agencies listed with the AICCCA here. You should also do a thorough check with the Better Business Bureau before you make your final decision.
If you would like to find out more about how to choose a credit counseling service, you can keep on reading right here.
Have a question for us? Leave a comment below!
July 20th, 2008 at 4:53 am
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September 7th, 2008 at 12:32 am
I am considering credit couseling services. Someone told me if I decided to go through with the program, it could impact my credit - making it worse than bankruptcy. Is this true? I’m having a hard time believing it is, but I’d like to get another opinion. Thanks
October 14th, 2008 at 4:46 am
This post represents great advice. So many organizations are poised to part debtors from what little money they still have.
I would add that even among the legitimate credit counselors, it may be more beneficial to work with your creditors directly. I found that one of the big agencies could only offer to lower rates on two credit card companies. Rates from two more issuers would actually have gone UP under their plan.
I did better on my own. Maybe you can too.
To take a stab at answering Sharon’s question, I think that when you agree to work with a credit counselor you must close all your credit accounts, and that can negatively affect your credit score, especially if it is marked as closed by lender. Even if it isn’t, closing multiple accounts can change your debt to available credit ratio, which, again, can hurt your score. As I understand it.
I even had a lender offer NOT to report they had closed the account if I would agree to pay an additional fee. Doesn’t that sound like hush money?