When you are ready to address your debt, credit counseling in its pure form is a good thing.

The goal of credit counseling is to help you better understand how credit works, what credit is for and when and how to use credit. This is not rocket science though there is a key point to keep in mind: in almost all cases credit counseling is a business. Big business.

You got into financial trouble because you didn’t plan well and spent poorly. Before you spend one more dollar of your money, make certain the organization you’re “hiring” to unravel your financial mess will not simply drag you deeper into it.

Be certain you will realize tangible benefits for your spending. If you insist on going forward with a credit counselor, check out their Better Business Bureau report. Research them online. It’s your responsibility to perform due diligence upfront, before you sign up. Ask as many questions, and ask for as much proof of the answers, as you want.

The goal is for you to avoid the credit counselor altogether. If debt reduction is your goal there is no need to incur an additional expense to reach it. And, if you are so lucky as to find someone who can truly accomplish the task of straightening out your financial mess, you will not have learned anything and likely find yourself right back in the same place.

Debt consolidation is an even more dangerous business. Once done it can deliver the erroneous impression that you have resolved your financial problems. What debt consolidation usually means is that you have swept your spending problems under the rug and gone about your life creating new debt. Unless you experience the process of paying off your debt, you are unlikely to create new spending habits that will keep you from spending your way back into debt.

I know a woman who was about to get married and really wanted to clean up her financial life before dragging her new wife into her mess. Though I strongly recommended that she work out her financial problems instead of filing bankruptcy and walking away, she insisted she understood the risks and went her way. The one risk she could not calculate, and the one that came back to haunt her soon thereafter was that she had not resolved the spending problem. Within a year of their marriage, the lovely new couple was drowning in financial despair, and staggering debt.

It has been statistically demonstrated that the vast majority of those who consolidate debt, whether by combining all the debt and taking a second mortgage or a personal loan, recreate the debt problem quickly. Then they have the consolidated debt, and a new mountain of debt.

When you take a second mortgage to consolidate debt, you put your home at risk for the dubious comfort of being “out of debt.” Don’t do it, even when pundits and marketers insist you will save money with a lower interest rate and those interest payments are tax-deductible.

Here is the ludicrous logic of debt consolidation. You bought too many sweaters, because you do look so pretty in pink, a new refrigerator, a new stereo and a computer. The bills are rolling in and you are struggling to make the payments. What is the credit card company going to do, come to your house and take your sweaters? Do you think they might arrive at night and take your refrigerator? I think not.

When you consolidate all this debt into a second mortgage on your home, or a home equity line, you have secured your unsecured debt with your home. Your home is now at risk if you can’t or don’t pay the mortgage or equity line payment. Exchanging unsecured debt for a lien? You have simply risked your home.

Forget about it!

Instead of consolidating your debt, pay it off.