Will Credit Counseling Ruin My Credit?
Discussing your credit with a counselor will not ruin your credit rating. Actions that will lower your credit score are late or skipped payments and excessive use of credit. Choosing to abandon a credit counseling strategy, piling on additional debt, consistently carrying high-credit balances and filing for bankruptcy can result in lowered credit scores. Using credit counseling services to improve handling of your finances can boost your credit scores because you are now using credit responsibly.
Other People Are Reading
-
Function
-
Credit counseling is helpful if your debt is overwhelming. Counselors help you prepare budgets and create a strategy for successful financial management. Credit counseling services can help with debt consolidation loans, bankruptcy considerations and can help you with strategies to reduce and eliminate debt. Some credit counseling groups can communicate with creditors for you and can even make your monthly payments for you after you fund an account with the counseling service.
Types
-
Some credit counseling services include debt management, pre-bankruptcy counseling and personal finance education. Debt management counselors compare amounts you owe against your income and then devise a strategy to pay off your debt. You will then make payments to the debt management services company, which will distribute payments to your creditors. Many states mandate pre-bankruptcy counseling prior to accepting bankruptcy claims. Credit counseling services can assist you in reviewing your debt and the impact of bankruptcy, and can help you determine if there are other avenues you can use to clear your debts.
-
Considerations
-
Note that debt management services typically do not handle criminal fines and child support payments. Credit counselors handle unsecured debt, and vehicle loans and mortgage payments continue as scheduled with your lender. In the case of car loans, counselors can sometimes negotiate a plan to prevent repossession. Keep in mind that you must make several on-time payments before your creditor returns your account to a non-delinquent status. It will, therefore, take time for your credit rating to improve.
Importance of Good Credit Rating
-
Obtaining loans requires an acceptable credit score. Lenders will not risk lending you money if you have a history of making late payments, skipping payments or mismanaging your finances. Getting a credit card depends on your credit history and some jobs, including those in the financial and security industry, review your credit history prior to employment. Even obtaining utilities such as electricity for your home requires a reasonable credit rating. Utility companies may assess deposit requirements or may not extend service at all. If you are already overwhelmed with debt, a credit counseling service may help you get your debt under control and improve your credit rating.
Warning
-
Steer clear of debt settlement companies that offer claims of ridding you of your debt without any cost to you. Be wary of companies that offer to clean your credit file -- instead improve your credit rating by paying your bills on time. Be cautious in choosing a counseling company. The Better Business Bureau advises families in financial trouble to seek help from a nonprofit credit counseling center. Families experiencing financial difficulties should use debt settlement companies as a last-ditch resort only.
-
