If you've already tightened the belt but still find it difficult to develop a budget or meet basic financial goals, you may want to consider working with a credit counselor. For those who are deep in debt, counseling is a great way to solve bigger-picture financial questions while managing day-to-day cash flow challenges. A number of debt counseling organizations are classified as "nonprofit," but that does not necessarily mean they offer free, affordable, or even legitimate services. See Avoiding Credit Repair and Credit Counseling Scams to learn more.
Credit counselors operate through local offices, online, or via telephone (or a combination of the three). In-person consultations are preferable. To find one near you, contact your bank, credit union, or a consumer protection agency. Also, military bases, housing authorities, universities, U.S. Cooperative Extension Service offices, and credit unions usually offer credit counseling.
Additionally, people who plan to file for bankruptcy must get credit counseling within 180 before filing. See Bankruptcy Credit Counseling and Debt Negotiation Programs for more details.
Legitimate, reputable credit counselors typically offer free educational services in addition to offering advice on managing debts and developing a budget. Even if you choose counseling services for a very specific issue, credit counselors will explore your entire financial situation and help you come up with personalized long-term solutions. The first consultation, which may be free of charge, typically lasts about an hour.
If the organization is unwilling to provide free information about its services until you submit details about your particular needs, it could indicate a fraudulent (or, at best, unprofessional) agency. You should do your research before committing in order to find a truly reputable counseling service. After compiling a list of organizations, reference them with your local consumer protection agency and the Better Business Bureau and then ask them a few key questions.
Not all consumer counseling services are created equal, while the least reputable ones can actually worsen your financial situation. In order to make an informed decision, you should ask them the following questions before choosing one:
What services do you offer?
Steer clear of organizations that insist on debt management plans (DMPs) before they have had a chance to review your finances. Look for organizations offering debt management classes and budget counseling.
Is there a charge for educational materials? What other information do you offer?
Organizations that charge for general information often are not reputable.
Will you help me come up with a plan for my overall financial situation, in addition to solving my specific issue?
What are your fees?
Get it in writing.
Are there payment options if I can't afford your fees?
Organizations that turn people away for lack of funds often are not reputable.
Will I sign a formal, written contract for your services?
Only sign documents that you have read and fully understand. Get all verbal offers and agreements in writing.
Do You have a license to offer your services in my state?
Are your counselors accredited or certified by an outside organization? If not, what is your training policy?
It's best to choose an organization whose counselors are trained by a third party.
How do I know my personal information (such as birth date, address, and Social Security number) will be kept confidential?
How do you compensate your employees? Do they get paid more if I agree to certain services, pay a fee, or contribute to your organization?
A "yes" answer to any of these means your best interests may be compromised.
