Suitability

• The Federal Trade Commission states that credit counseling is for those who are "not disciplined enough to create a workable budget and stick to it, can't work out a repayment plan with...creditors, or can't keep track of mounting bills." If this sounds like you, contacting a counselor may be your best option.
  
  

Method

• Credit counseling organizations assess individual needs and create a budget. Agents contact creditors and negotiate lower interest rates, so that debts are paid within five years. One monthly payment goes to the counseling organization, and they pay your creditors.
  
  

Pros

• People who genuinely want to get out of debt benefit from credit counseling. Once the debt is paid off, they see credit scores improve. Also, because clients do not use credit while enrolled in a debt program, they learn to use cash.
  
  

Cons

• If you fail to make payments to your debt management plan, you may get kicked out of the program. Additionally, you cannot use credit cards while enrolled in the program, unless the use is authorized by the organization.
  
  

Effects

• When you initially enroll in a program, you will see your credit rating drop a bit, because companies see that you require a third party to pay your bills. However, after a year of making regular payments, most people see their credit improve.