Q: Hello Ms. Khalfani-Cox. Is it better to work with a debt management company and pay off a lot of creditors every month over a long period of time (I would be paying off the full amount of the debt… not settling (debt settlement)).

Or is it best to contact each creditor who has reported me to the credit bureaus and ask them to remove the negative information from my credit reports if I offer to pay off the entire debt in 2-3 installments?

I’m thinking that my credit report won’t look any better after making monthly payments over the course of 1-2 years paying off the debt.

A: I think you are mistaken in assuming that debt management or using a credit counseling agency will hurt your credit rating. It won’t. In fact, it will likely have the opposite impact.

How Legitimate Credit Counseling Agencies Work

A good debt management program can lower your interest rates and help you get out of debt much more quickly than you might on your own.

If you enter a debt settlement plan, however, that’s an entirely different story. Debt settlement can hurt your credit.

Watch this video for a quick explanation of what to look for in a debt management firm and why you should avoid debt settlement.

Useful links: List of approved credit counseling agencies by state and by judicial district: http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm