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How To Eliminate Debt With Credit Counseling

If you're struggling under a massive pile of debt, one option available to you is credit counseling. Credit counseling agencies are designed to help you put together a plan for getting out of debt. But you need to make sure you work with a reputable credit counselor and that you ask the right questions.

Before selecting a credit counseling agency, you need to do your research on the available agencies in your area. Once you've narrowed it down to some good possibilities, you'll want to interview an agent from each agency before you hire them, sign anything, or give them money.

You'll want satisfactory answers to the following:

Are they federally approved, nonprofit and tax-exempt? Ask for its copy of the IRS approval of nonprofit status document. If they can't show this to you but tell you they are non-profit, look for another agency.

Are they licensed to offer credit counseling in your state? Not all states require a license but if yours does, make sure the credit counseling agency has the proper license.

How do they charge for their services? Most reputable agencies do not charge a lot for their services. If you enter into a debt management plan with them, they will most likely charge a monthly administrative fee.

Ask them for a list of all their fees. Some less than reputable agencies will give you a "loan" to pay off all your debts and then you make monthly payments to them. Payments that have rather large interest rates. Steer clear.

Make sure you see the contract. You or a lawyer should look this over before you sign it.

How do the credit counselors get paid? Be wary of agencies that pay their counselors commissions. The commission structure may mean that their best interests don't line up with your best interests. You're better off with a credit counseling agency that pays their agents by the hour, or a yearly salary.

Make sure to have these questions, and any others you have, answered before deciding to work on your debt management plan with a credit counseling agency.

Learn more about how to use debt management tips with Freddie Johnson's free articles on debt relief, debt consolidation, debt management and credit repair tips at