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You've probably noticed the commercials for credit counseling services that claim they can turn your financial life around. You have also probably heard the horror stories of consumers who say that one of these services left them worse off than they started. The truth is somewhere in between. Credit counseling services can really help those who have already fallen behind on their payments. The key is understanding how they work, and when to go to them for help.

A credit counseling company will assign you a counselor, who will study your bills and your income to determine whether you are a good candidate and what you can afford to pay. They will then send proposals to your creditors to alert them that you will be using credit counseling. From then on, you will send one consolidated monthly payment to the credit counseling company, who will in turn take a monthly fee off the top and disperse payments to each creditor. The idea is that major creditors will adjust your account to a smaller monthly payment and a lower interest rate. Many will also bring your account current and stop over limit and past due charges. The process of updating your accounts usually takes between one to three months.

This transition period is the main reason why credit counseling can only help those who are already behind in their payments. While you start making your lower payments right away, the credit card companies will take some time to update your minimum payment and due date. So your first couple of payments will be too low and probably late. This will be reported on your credit report. If you were already making late or partial payments, your credit has already taken a hit and this transition will not affect it much. But if you have been making your payments on time and your credit is still decent, this period will drastically hurt your credit score.

If you're behind on your credit card payments, are considering bankruptcy, or are receiving collection calls, a credit counseling service can help you. Chances are you are paying ridiculously high interest rates, with late and over limit fees tacked on every month. Enrolling in a credit counseling service can get your interest rates back down to a reasonable level. They can also have your account brought up to a current status, which will stop the extra fees and pull your account out of the collections department.

Credit counseling, debt management, and debt consolidation are usually all the same thing. You make one monthly payment to

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