Credit counseling is good, but pick a reputable agency

With the implementation of sweeping bankruptcy reform laws, credit guidance is now a requirement for anybody who is considering filing for personal bankruptcy. Prior to the recent debt relief reform legislation, credit counseling was a program that many consumers used to get their financial obligations organized. Since sweeping bankruptcy reform laws went into effect in late 2005, more and more people with financial problems are having to worry about a service that they have never previously had to deal with - credit counseling. 

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While we largely disagree with the primary provisions of the Act, the credit counseling requirement was a smart idea. A lot of debtors simply do not understand even simple matters when it comes to handling financial matters. A small amount of education can be very helpful, even if it is a precursor to bankruptcy.

The first goal of any financial counseling organization ought to be to help the client. Many creditors will share a percentage of a debtor's paid-off bills with the counseling organization that helped the consumer pay back the obligations, a fact which is not often disclosed to the debtor. Unfortunately, not all credit guidance agencies are looking out for the consumer. A good number of businesses are primarily interested in increasing their profits; something that can be effortlessly accomplished.
 

There are a couple of things to avoid when you are looking for a credit counseling organization.

• Questioning correct information on your credit report is a stall tactic that will lead nowhere and will do more harm than good. Avoid agencies that urge you to dispute any and all late notifications or failure to pay notes on your credit report, even if they are true.
• Watch out for businesses that tell you that you can have a new credit ID by applying for an Employer Identification Number to use in the place of a Social Security number. Applying for a different identity to hide your debts is illegal, and the credit bureaus are smart enough to connect the dots. Ultimately, they will realize that the "new" identity and the old one are the same. Agencies that entice you to engage in fraudulent activity are doing you no favors.
• Agencies that mandate payment for work ahead of time are looking out for themselves, and not for their customers. Avoid companies that want you to pay ahead of time for credit repair services. By law, credit professionals cannot request payment from you until the work, if any, has been performed.
• Many agencies are claiming to have Federal approval when they may not, resulting in customers who pay fees to the businesses but don't get the guidance necessary prior to a bankruptcy filing. If the business tells you that they have been authorized by the US. Trustees office, ask them to confirm it. Only agencies that have been approved by the U.S. Trustees office will be accepted by the courts as a requirement for a bankruptcy filing.
• Keep away from agencies that urge you not to call any of your lenders. Although you do obtain some negotiating leverage from not paying your monthly debts, you will also see further damage to your FICO score. In order to gain an advantage in debt discussions, many agents will tell you not to communicate with your lenders or pay your bills.

Be positive you know how to tell the difference between companies that will assist you and those that will do you harm. There are lots of experienced agencies at your disposal, but there are also some disreputable ones.