Credit Counseling

• If you're having trouble making payments to your debt, it's a good idea to seek help in the form of a credit counselor. A credit counselor will sit down with you and look closely at your budget to figure out the best way to tackle your debt. The Federal Trade Commission recommends using a credit counseling service that has local physical offices.
  
  

Debt Management Plan

• Once you've met with a credit counselor, she will help you to decide if a debt management plan (DMP) is the right plan of attack for you. If you enroll in a DMP, your credit counselor will work with your creditors to try to get lower interest rates or to waive certain fees. After that, you make monthly payments directly to the credit counseling company, which in turn pays your creditors. From the outset, your credit counselor will map out the timeline for your payments so that you have a clear end date when your debt will be completely paid off.
  
  

Pros

• Consolidation through a DMP is beneficial if you have had a hard time making payments and you can't get a handle on your credit by yourself. Credit counseling services negotiate with your creditors, and you only have to be responsible for one monthly payment rather than multiple payments. A DMP also helps you to get back on track quickly, which means that if you're committed to paying off your debt, you will get it paid off within a few years.
  
  

Cons

• A DMP is seen as a bad mark on your credit report. Although you're paying off your debt, which is better than filing for bankruptcy, you still aren't paying off the full amount. This may make it difficult to get credit in the future, since creditors want clients who will pay them back. If you're going to use a DMP, it's important to build a history of on-time payments to add points to your credit score.