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Claims of "wiping away your debt problems painlessly" may be too good to be true. While some credit counseling agencies may help those who are behind in their debts to get back on their feet, others may not be on the up and up. 

The National Foundation for Credit Counseling with nonprofit affiliate offices in just about every city, originated the concept of negotiating lower interest rates and payment plans for people who had fallen behind. With consumer debt at an all-time high, hundreds of rivals sprung up, many with slick marketing campaigns, TV ads and similar-sounding names. 

Some of these agencies do a good job negotiating on your behalf for repayment plans. Others charge hefty upfront fees, pay huge salaries to their executives and build their own wealth with money that should have been going to pay off creditors. Some even target people who aren't even behind on their payments but who simply want to lower their interest rates. 

The worst of the bunch are not credit counselors but advertise as specialists in "debt settlement." They promise to help you wash away your debts for pennies, while charging you upfront fees in the neighborhood of $3,000 and up! These scoundrels often take your money and run, disconnecting their phones and moving to another location overnight where they can operate under another name before moving on. 

Today debt counseling has grown to a multi-billion dollar industry. The IRS is concerned that some have used their tax-exempt status to circumvent consumer protection laws and take advantage of those who are already in financial distress.

If you’re able to pay your bills and are current on all your accounts, you almost certainly don’t need credit counseling. If your interest rates are too high, you usually can negotiate a lower rate with your credit-card companies just by asking or perhaps threatening to move your account elsewhere.

So when is credit counseling potentially a good idea?  When:

  • You can’t make the minimum payments on your credit cards.

  • Creditors and collection agencies are constantly calling you 

  • You've tried to work out reasonable repayment plans with your creditors, but these have failed