How to Not Get Ripped Off by a Credit Counseling Agency

How to Not Get Ripped Off by a Credit Counseling Agency

If you’ve got debtors calling and you’re feeling overwhelmed by bills, you might consider a credit counseling service. Such companies will work with you to create a budget and good financial habits, and might help you pay off your debt.

Credit counseling isn't for everyone. Some people are just too far into debt and will have to declare bankruptcy. But it's a good option to consider if you feel like you can no longer handle your financial situation yourself. And if you find a credit counselor you can trust, they'll tell you what your options are.

But while many credit counselors have your best interests in mind and want to help you clean up your finances, others—who pop up faster than the FTC can shut them down again—are looking to take advantage of your vulnerable position and will disappear once you've paid, as at least one LearnVester has learned the hard way. Even legal credit counseling services are often under pressure to bring in more clients, so they over-promise results or understate fees to get you to sign.

The takeaway? Sign up with the right credit counseling agency, and you can get out from under a load of debt. Sign up with the wrong agency, and you'll find yourself worse off than before. And it's often hard to tell a good agency from a bad one. Fortunately,, a website that uses data to make unbiased assessments of organizations ranging from colleges to software, has a list of its top-rated credit counseling agencies, based on factors like fees and accreditation. Here are the top ten:

  1. Consumer Credit Counseling Service of New Hampshire and Vermont
  2. Consumer Credit Counseling Service of the Midwest, Inc.
  3. ClearPoint Financial Solutions, Inc.
  4. Consumer Credit Counseling Service of Maryland & Delaware, Inc.
  5. Consumer Credit Counseling Service of Northeastern Iowa, Inc.
  6. Consumer Credit Counseling Service of Greater Dallas, Inc.
  7. GreenPath, Inc.
  8. Consumer Credit Counseling Service of Central New York, Inc.
  9. Consumer Credit and Budget Counseling, Inc.
  10. Best Credit Service, Inc.

Find Your Perfect Agency

If none of these services are in your area, don't despair. We'll show how to pick out one that will work with you to get your finances back on track.

To start, check the websites of the Department of Justice, the Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling to find approved credit counseling agencies. Then, whittle down your options using the ranking system on Finally, check with your state Attorney General, local consumer protection agency and Better Business Bureau to see if there have been any complaints filed about the agency.

If you don’t find any complaints, that is a good first step, but it doesn’t provide a complete picture. Now it's time to really get to know the agency, by asking these questions:

1. Is it a charitable organization?

The agency you choose should be a nonprofit focused on getting you out of debt, not making money. To find out if your agency has official charity status, go to and choose "Search for Charities" on the left-hand side.

2. Where is the counseling done?

Agencies offer counseling online, by phone or in their office. If possible, choose in-person counseling, which will help you avoid telemarketing scams and likely help you feel more comfortable.

3. Does it provide free information about itself?

A reputable credit agency will gladly provide free information about all its services and certifications without asking you for any details about yourself first, and certainly without demanding any up-front fees.

4. Are the counselors accredited? How are they paid?

You want the credit counselors to be trained by an outside organization—not just the agency itself—to ensure they are knowledgeable in matters of personal finance.  Also look for Certified Financial Planners®, lawyers and certified public accountants on staff, since they are educated and certified in personal finance, bankruptcy and taxes. And ask how counselors are paid. If counselors are paid based on the number of services or products they sell you, or on a percentage of your debt, that is a bad sign.

5. What is included?

If you are deep in debt, you’ll need an overhaul of your financial management habits, not just your debt. Look for an agency that offers advice and counseling on developing a budget (you can also find advice on these important topics in our free budgeting course and Get Out of Debt Bootcamp), as well as free educational materials and workshops on subjects like mortgages and savings. Ask if there will be an initial hour-long session to go over your finances as a whole, and whether follow-up sessions are offered. If the agency tells you to sign up for a debt management plan without ever analyzing your financial situation, it shows they are trying to make money, not help you with your finances.

6. How much do its services cost?

Fees vary from service to service, but a good agency will charge less than $50 a month or nothing at all. It all depends on what is available in your area. A good rule of thumb is that your credit counseling fee plus what you will pay creditors should be less than what you are currently paying creditors. If you’re encouraged to give a voluntary contribution, ask if you will receive the same level of service if you don’t contribute. If the answer is no, go elsewhere.

7. Is there a formal or written contract?

Make sure all promises from the agency are in writing, and read the whole contract carefully before signing. It should disclose how much you will pay; services included; how long it will take to pay off your debt; termination provisions; and the dispute resolution process. The agency should be happy to give you as much time as you need to understand everything before you sign.

8. Does it make any too-good-to-be-true claims?

According to the Federal Trade Commission, a legitimate credit counseling service will never:

  • Guarantee they can remove your unsecured debt
  • Tout a "new government program" to bail out personal credit card debt
  • Promise that unsecured debts can be paid off with pennies on the dollar
  • Tell you it can stop all debt collection calls and lawsuits
  • Claim that creditors never sue consumers for non-payment of unsecured debt
  • Promise that using their system will have no negative impact on your credit report, or
  • Claim that they can remove accurate negative information from your credit report

If an agency makes any of these claims, walk away.

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