The Impact of Credit Counseling on Credit Scores
In the past, attending credit counseling could have hurt your credit score. Today, this is no longer the case. While credit counseling cannot directly affect your credit score, it can show you ways that you can improve your credit score.
A credit counselor can walk you through your credit report and show you what items are positive or negative. While a credit counselor cannot legally remove negative items that are legitimate, they can show you how to increase the positive items and let you know how long negative items will remain on your report. Your actual credit report can be obtained for free, and the credit counselor should be able to give you a good idea of what your credit score is from that.
One way that credit counseling can positively influence your credit score is by helping you find ways to become current on accounts that you were falling behind on or by lowering the balances on your existing credit cards. A great way to do that is by enrolling in a debt management plan. A debt management plan provides you a systematic approach to paying your creditors. You will also be able to obtain in many cases lower interest rates and reduced fees on your accounts. By becoming current on those accounts and working on lowering your balances, you will steadily be increasing your credit score. Paying back the debt you have is seen positively by future lenders.
However, if you choose an option like bankruptcy or debt settlement where you will not pay back all of your debt, you will see a lowering of your credit score and future lenders will know that they are lending to you at a higher risk, therefore they will give you higher interest rates. A credit counselor can show you how these work and how they will affect your financial history.
Even if you do not enroll in a debt management plan, it might be a very good idea to talk to an accredited credit counselor. They can walk you through your financial problems and help you understand how you can get back on track and reach forward towards your financial goals. The same advice does not apply to everyone, so until you talk a knowledgeable person about your specific situation, you will not know what might be right for you.
Ronnica Rothe is a graduate with honors from the University of Oklahoma and a current student at Southeastern Baptist Theological Seminary. She works with Personal Financial Network to help individuals get out of debt and reach their financial goals.
