A friend asked me the other day about credit counseling, because she's trying to get her financial life squared away after some hard times. I figured this was a good place to put down some related thoughts, even though it's not tech-related. It's an important topic for many. You have to be very careful these days what you're getting yourself into, especially now that the new federal "Bankruptcy Abuse Prevention and Consumer Protection Act" is about to go into effect (November 17th). The act requires participating in some form of credit counseling (no one if sure what that means yet, of course) before one can declare bankruptcy. It also changes who can file which forms of bankruptcy based on median income levels, ability to pay and other factors. It's probably a good thing, but the whole credit counseling requirement is a potentially confusing and fraudulent mess.

The problem is this - While the "consumer credit counseling" industry has many worthwhile players, it is also plagued by a whole slew of useless, harmful and downright fraudulent thieves. Not all companies that offer "credit counseling" are legitimate. When it comes down to brass tacks, if you owe someone money, you owe the money. Negotiating settlements is always a possibility, but you do so at a cost, and unless an organization has a program to work with you to change your financial habits and learn how to budget, it's a big waste of time - and potentially a rip-off in the making.

Chances are very good that any company that promises to "repair" your credit score/record, when the entries that appear in your credit report are accurate and valid, is counting on the possibility that you're a sucker and is trying to take advantage of your emotional situation. Unfortunately, these rip-off businesses charge people who are already in financial straits serious amounts of money for a service and promises that they almost certainly can't deliver on. Don't do it.

Only false information can be reliably removed from a credit report, and even that often takes a bit of effort and a chunk of your time. If you want to "fix" your credit, there's one way to do it: Pay off your debts, pay the bills yourself (firms that offer to make payments for you are notorious for being late, which shows up as a black mark on your credit report), and make all of today's and tomorrow's payments early or on-time. It takes an extended period of time (like as in months or years) for a credit score to improve, and there is no overnight repair possible when you've made bad financial decisions. It sucks to hear that, but it's the truth. Most people who end up in credit hell are also the people who can't stand the thought of putting a few years of effort in to improve their situation. They want results right now, or in the *very *near future. Sorry, it doesn't work that way. Come to grips with that fact and accept that you can start making a difference today and see some very real long-term results down the road.

Most importantly, don't fall prey to "credit repair" and "credit counseling" companies that want to take your money up front and make promises they can't deliver on. Check out any companies you think you might want to work with in depth and before you engage them. Non-profit organizations are out there to help, but unless you're careful it might be difficult to tell them apart from the sharks. Don't fall prey.

NOTE: The United States Dept. of Justice has a list of approved credit counseling agencies by state. They also have information online about choosing a credit counselor.