Credit Counseling Services - A Brief History

Not so long ago the world of credit counseling services was dominated by nonprofit firms providing consumer credit counseling services. These consumer credit counseling firms were sure to always put the needs of the consumer first when dealing with creditors and negotiating more favorable interest rates, terms and conditions for the money they owed. These firms were, and still are, very good at what they do. Tens of thousands of consumers have recovered from staggering debt loads and been able to reclaim their financial lives after receiving valuable credit counseling and excellent tips on how to use credit wisely and avoid falling back into debt.

As with any industry that provides a good service and proves popular and effective, however, there was a rush of imitators entering the field. Soon, every one and their brother was billing their company as a credit counselor, debt relief specialist and debt settlement managers. Unfortunately for consumers, and also for the honest players in the consumer credit counseling industry, these fly by night organizations are more often than not unable to deliver on the promises they make consumers.

As a matter of fact, falling pretty to one of this disreputable debt relief or credit counseling firms can leave consumers worse off than when they came through the door. We have all heard the story of the consumer who diligently made their monthly payment to the debt relief service every month, only to have that debt relief service pocket most of the money and pass only a small portion to the consumer's creditors. This type of behavior gives a black eye to all the excellent legitimate consumer credit counseling services that are still working hard to help consumers get a handle on their debt and avoid having to seek bankruptcy protection. Some Better Business Bureaus around the country have been warning consumers to steer clear of debt relief services, without pointing out the difference between legitimate consumer credit counseling services and the charlatans who take the money and run.

It is important for consumers to make sure they are dealing with a reputable consumer credit counseling firm whenever they seek help with their debts. Fortunately, there are several things that consumers can watch out for to make sure they are dealing with a firm that truly has their best interests in mind. For one thing, true consumer credit counseling services provide help only to those consumers who truly need it. If the consumer would be better served with a do it yourself approach, or if all they need is a good budget plan instead of full credit counseling services, the honest firm will tell them that and help them get the help they truly need. Getting consumers the help they need, not just the services sold by the firm, is what sets honest consumer counselors apart.

Typically, a consumer will need the help of a consumer credit counselor if:

They are unable to pay the minimums on their credit cards.
They are constantly late paying one or more regular monthly bills.
They are receiving calls from creditors and collection agencies.
All efforts to work out reasonable repayment plans with creditors have failed.

A disreputable firm will attempt to sell credit counseling services even to people who do not meet these criteria. In addition, fly by night firms will pressure the consumer to sign a contract on the spot, even before the details are worked out, sometimes before the credit counselor even knows how much is owed and to whom. They may promise that the details "can be worked out later" or that they will complete the blank lines on the form. This is a huge red flag. A legitimate credit counselor will never ask the consumer to sign a contract until the details have been fully examined.