I heard an ad on the radio recently claiming that all debt management agencies are really just working for the credit card companies.

I couldn't disagree more. While disreputable businesses can be found in any industry, there are many excellent debt management/debt consolidation companies out there.

Generally charging a one-time setup charge and monthly administration fee, these companies will take on the unwieldy task of negotiating directly with creditors to reduce payments and create affordable payment plans. They may be able to reduce the interest rate you're paying, get late fees waived, and eliminate collection calls.

The goal is usually to roll the customer's debts into one affordable payment. From that single payment, the agency will then make timely monthly payments to each creditor, quickly repairing their client's damaged credit. The client will know in advance the date their monthly payment to the debt counseling service will end.

When borrowers have had credit issues, lenders consider applications from those who have worked with a debt counseling service much more attractive than from those who haven't. There are several reasons:

• The credit report may mention a debt-consolidation plan with reduced payments, but the payments are timely, which is what lenders care about when deciding whether to make a loan.
• Debt-managed accounts are active accounts, which are much better than inactive collections and past-due balances because they show an applicant is working on fixing his or her credit.
• Most importantly, the lender knows the applicant has taken the time and effort to get their finances in order.

The important thing is to find a counselor you can trust. A good place to start is agencies approved by the U.S. Department of Housing and Urban Development.

Two agencies our borrowers have had success with are the nonprofit Greenpath Debt Solutions, (800) 327-6778, and CareOne Debt Relief Services, (888) 888-2273.

Ron Thompson is a Welcome Home Loans Mortgage Loan Originator at the Community Loan Fund.

NMLS #225348. Licensed by the New Hampshire Banking Department.