 TITLE: How to Know Whether You Need a Credit Counselor CONTENT: Is Credit Counseling Right for Me?\n----------------------------------\nIf you're thinking about working with a credit counselor, it's important to understand both the benefits and drawbacks and how they relate to your situation.\n### Pros of Credit Counseling\nWhether you're thinking of using a debt management plan or you just want advice on how to better manage your money, here's how credit counseling can help you:\n*   **The advice is free.** While debt management plans do require upfront and monthly fees, you can attend workshops or get one-on-one financial advice for free. So if you just want to improve your money management, it may be worth having a credit counselor take a look at your situation.\n*   **It could reduce your debt-related costs.** A credit counselor may be able to negotiate lower interest rates, reduced or waived fees, and even a longer repayment term to help make your monthly payments more affordable and save you money in the long run.\n*   **It can simplify your debt payoff plan.** With a debt management plan, you pay just one monthly payment to the credit counseling agency instead of continuing to pay each creditor individually. Also, if you're incorporating collection accounts into your plan, it will end the stressful collection letters and calls when the credit counselor takes over.\n### Cons of Credit Counseling\nWhile working with a credit counselor has some clear benefits, it may not be the best approach for every situation, especially in regard to debt management plans.\n*   **It can affect your credit score.** Getting on a debt management plan doesn't affect your credit score directly. But credit counselors typically require you to close your credit card accounts at the beginning of the plan. Doing so eliminates available credit and can increase your overall credit utilization ratio, which measures how much of your available credit you're using. A high ratio can adversely affect your credit score.\n*   **Debt management plans aren't free.** The typical initial setup fee can be as high as $50 with monthly fees of around $25, according to the National Foundation for Credit Counseling (NFCC). While that may feel like a small price to pay for debt relief, it's still something to consider with your budget because debt management plans typically last three to five years. That said, credit counselors may be willing to waive their fees if you're experiencing severe financial hardship.\n*   **Not all debts are includable.** Debt management plans are designed to help you pay off unsecured debt like credit cards, personal loans, medical debt and collection accounts. If you're struggling with your auto loan, mortgage or home equity loan, a credit counselor can give you advice but can't work with your creditors. Also, student loans are typically excluded.\n### Who Can Benefit From Credit Counseling?\nCredit counseling is best suited for someone who either needs some free financial advice or is struggling to manage unsecured debt.\nKeep in mind, though, that there are some limitations to what a credit counseling agency can help you do. If you're struggling with secured debt, you want to settle for less than what you owe or your financial situation is dire, you may want to cautiously consider other options, such as debt settlement or even bankruptcy.\nIf you're not sure which path to take, a credit counselor can help you find the right fit based on your situation. END