If you are using multiple credit cards and struggling to pay your dues, credit counseling can provide you with an ideal debt management plan.

Credit counseling may help you stave off bankruptcy. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has made it mandatory (with few exceptions) for those who plan to file for bankruptcy protection to seek credit counseling from a government-approved organization within 180 days before they file.

So should you use credit counseling? Here are the pros and cons:

Pros of Credit Counseling

• A credit counseling organization arranges for your debts to be paid through a debt management plan. You pay the credit counseling company and they distribute the money among your creditors. If you have nine credit card accounts, you don't need to keep reminding yourself to pay each one.
• You won't have creditors or third-party collectors frequently calling you up
• Credit counseling services negotiate with creditors to work out a repayment plan, and they are likely to get your interest rate and your monthly payment with each creditor reduced.
• It is a good option for those who don't have trouble shelling out their minimum payments but face high interest rates on their cards. A credit counseling service saves you money by reducing interest rates.
• Your delinquent accounts will get a re-rating. If you make regular payments, it is possible after three months to have those accounts re-reated. The faster your accounts are re-rated, the faster your credit score will go up.

Cons of Credit Counseling

• If you have trouble making minimum payments to creditors before opting for credit counseling, you may find the monthly payment under your credit counseling program too expensive. Monthly payments often cost as much, if not more than your current minimum payments. Debt negotiation may be a better strategy for you.
• You may not be able to use your credit cards. Your cards are likely to be frozen even if you were making minimum payments on time earlier. The creditor interpets entering a credit counseling program as a sign of financial trouble and would be wary about giving you credit.
• Credit counseling will be marked on your credit report. It may not hurt your credit score but it may prevent someone from giving you additional credit.
• If you are trying to get a mortgage to buy a home, being in a credit counseling program may adversely affect your chances.

Make sure you read the Federal Trade Commission's guide, Fiscal Fitness: Choosing a Credit Counselor, before searching for a credit counselor.

You will find more details at the National Foundation for Credit Counseling's website.