Have you recently lost your job? And do you have credit card debt? A thought that might have crossed your mind—take money out of my 401(k) and pay on credit card debt. No, no, no.  According to Gerri Willis, host of CNN Open House, it is never a good idea to use 401(k) money for anything but retirement, especially if you are near retirement.

A better way to go—talk to your credit card company. They can usually work out a payment plan, possibly with lower interest, and you may be able to get part of that debt forgiven. If you have a good credit rating until your job loss, it may be easier to deal with the credit card company. Some are helpful and some are very hard-nosed.

There is another alternative called debt reduction or debt negotiation. These plans claim they can negotiate down your debt by 40 to 60%. While this sounds attractive, there is a down side. You must stop paying on your credit card bills while you pay into an escrow account for negotiation and fees. The fees are rather significant and your escrow reserves must build up so the company can negotiate. Meanwhile with no payments being made your credit score takes a huge hit. Some credit card companies will phone you several times a day. You are instructed not to take the calls and if you do, refer them to the debt reduction firm.

If you have a good credit rating, it can be very difficult to watch your score take this huge hit.

Are you having trouble keeping up with your credit card payments? There is a plethora of companies out there anxious to help you. They promise they can negotiate settlements with your credit card companies that will get you 40 to 60 percent off your balances. These promises are very enticing but know what you are getting into before you sign for one of these debt reduction plans.

These claims may all be true, but be aware that your credit score will take a severe hit. Also, be aware that they charge a hefty fee to set up the plan (about 18% of your total balance). Although this fee is not paid upfront directly, it is part of the settlement.

You must completely divorce yourself from the credit card companies and you must make payments to an escrow fund. The debt reduction company takes a hefty portion of the payment and maintenance fees take the rest for several months. None goes toward the escrow account and the balance remains at zero for several months. When there is enough money in the escrow account, the debt reduction company will begin negotiations with the credit card companies. Meanwhile, some credit card companies will harass you with numerous phone calls. If you have caller ID, you are instructed to let these calls go to voice mail.

So you can see that you will endure several months of uncomfortable waiting and watching your credit score plunge while avoiding your creditors. If you are a conscientious bill payer and like a good credit rating, this may not be for you. Evaluate closely before you sign.