Guest Author - Rhonda Cliett

For many consumers, a mountain of credit card debt becomes an impossible situation when the monthly payments extend beyond reach. Consumers may feel they are backed into a corner and have no viable alternatives. As a result, it can be very comforting to discover that someone, such as a credit counselor, is on their side. Unfortunately, when this occurs, a consumer tends to overly trust a credit counselor because they feel they have no one else to turn to – no other options.

A credit counseling organization can be a viable option and there are many reputable credit counselors who sincerely desire to assist the consumer. However, the industry does have its share of non-creditable companies. If you decide to seek the help of a credit counselor, you need to make certain you are establishing a relationship with a trusted business. There are two steps that are important for you to follow.

The first step is to research the company with the Better Business Bureau (BBB). You can do this through the BBB’s website. However, simply having a clean record with the BBB is not a guarantee that the company is completely honest but it is a good way to eliminate those with known and documented problems.

Credit counselors have either established themselves as a non-profit agency or a profit agency. A non-profit agency conjures up thoughts of an organization being run by volunteers who are selflessly concerned with your well being. Unfortunately, this is not always the case. Many companies have violated their non-profit status. The Federal Trade Commission offers some great advice on questions to ask the credit counselor to determine if the company is right for you.

The next step is to understand what a credit counselor can and cannot do for you. They cannot “repair” your credit by eliminating negative information from your credit report. Instead, they should analyze your entire financial situation and provide advice on managing your money and your debts. This would include advice regarding developing a budget and developing a savings plan for the future.

A Debt Management Plan (DMP) is often proposed as a solution for the current situation. It is important to remember that a DMP covers unsecured debt only. This means it excludes secured debt such as a home or automobile loan. The way it works is that you deposit a certain sum each month with the credit organization and they in turn pay your unsecured debts with the money you are depositing. The advantage is that you might receive lower interest rates from the credit card companies and they might also agree to waive certain fees. You also have the advantage of making only one payment for your unsecured debts.

The bottom line is that a credit counselor can be a viable option in a seemingly hopeless situation, however, you must first do your homework to make certain that the credit counselor you select represents an honest reputable organization.