How to select a credit-counseling agency

Laura T. Coffey • Profile • E-mail

Are you reeling from the weight of credit-card bills, student loans or other debt? If your debt payments – not including your mortgage and car payments – have spiraled to 25 percent to 50 percent of your take-home pay, you might need some help to get the problem under control.

As painful as your situation is right now, you do have options, and this column will detail some of those options for you. One of them is to seek out help from a credit-counseling agency – so long as you’re extremely careful about choosing the right agency.

Here’s why your choice matters so much: A reputable credit counselor can help you repay your creditors at reduced interest rates, set up a personal budget and avoid bankruptcy. An unscrupulous agency can saddle you with sky-high fees and leave you with even more serious financial woes. This is especially true of the credit-repair outfits that advertise incessantly on TV.

The following tips can help you decide how to tackle your debt once and for all.

1. Consider self-help first and foremost. Even if you hook up with the most trustworthy credit-counseling agency on the planet, you’re still going to be paying ongoing fees for the agency’s services – and of course, that’s money you could be using to whittle away at your debt. All on your own, you may be able to score lower interest rates and work out more manageable repayment plans simply by calling your creditors and talking to them about your situation. And by setting aside, say, one afternoon of hard-core plotting and scheming, you could craft a personal budget and resolve to stick to it. Granted, if you know yourself well enough to recognize that these steps aren’t realistic for you, you might need outside help. Such help also may be needed if you’ve already tried these steps unsuccessfully, if you consistently can’t pay all of your bills each month, or if you’re not able to keep up with even the minimum payments on your credit cards.

2. Give Debtors Anonymous a try. You could get free, confidential help through Debtors Anonymous, a 12-step program that provides support and guidance in a manner similar to groups such as Alcoholics Anonymous and Narcotics Anonymous. The catch is that you have to be open to participating in the Debtors Anonymous program; resisting the assistance and advice given won’t help your situation very much. To find meeting times and locations in your area, visit the Debtors Anonymous Web site and click on “Find a DA Meeting”.

3. Avoid credit-repair clinics and debt-settlement companies. Credit-repair businesses often run slick, hope-inspiring TV commercials that promise, “We can erase your bad credit, 100 percent guaranteed!” Debt-settlement or debt-negotiation companies promise to help you settle your debts for pennies on the dollar. Be aware that these businesses often charge hundreds or even thousands of dollars without providing substantial help to consumers – or by providing services that people can do all on their own for free. Even worse, some debt-settlement companies across the country have been known to charge consumers thousands in up-front fees – and then disappear with the money. They can leave people with other big headaches as well, said Gary Almond, vice president of operations for Better Business Bureau of the Southland in Southern California. “If they charge big fees up front, or if they ask you to stop paying your bills to make your creditors believe that you are not going to pay … those are big red flags,” Almond said. “This wreaks havoc on people’s credit scores.”

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