Released: August 28, 2006

Credit help gets a makeover

Source: By Dayana Yochim, The Motley Fool

America’s gotten a lot savvier about credit. Now that we can take a free, no-strings-attached gander at our credit reports every year (courtesy of www.annualcreditreport.com), we’re more cognizant of the impact bad credit has on our everyday lives.

So are we stampeding into the arms of credit counselors for makeover advice? Not really. But these agencies hope that’s about to change.

It’s only a matter of time before you’ll be able to get a debt payment plan, budgeting tips, and cooking and dating classes from your neighborhood consumer credit counseling agency.

OK, those last two are a bit overstated. Still, consumer credit counseling organizations have begun expanding beyond debt management plans into housing counseling and credit report rehab advice. It was bound to happen, since the industry has experienced a few crushing blows.

In 2003, the Consumer Federation of America released the first-ever study of credit counseling in America. It painted an unflattering picture of the business that, frankly, was long overdue. In a nutshell: A lot of shady organizations were hiding behind the altruistic-sounding 501c(3) nonprofit status and behaving in a manner that was, how shall we say, very un-501c(3)like. That caught the attention of the IRS, which brought the smackdown to a lot of unscrupulous firms—though not before countless consumers struggling with debt were bilked.

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