Credit counseling could impact future borrowing

Receiving credit counseling is frequently treated as a good move in lending circles, but it could send possible lenders or creditors away. Depending on what your counselor does, credit counseling could hurt your credit score.

Counseling agencies can help you organize your finances, create a budget and repay your debts in a manner that will be agreeable to your lenders. Although credit counselors are currently quite busy assisting the bankrupt, we need to remind our readers that they are there for other reasons, too. Most everybody knows that credit guidance is now required as a prerequisite to debt relief in court.

While there are benefits to receiving help, there is a downside to credit counseling, as it could harm your score and impact your ability to take out a loan. Counseling can help anyone with money struggles; especially those with a larger than average share of outstanding debt.

Just talking to a credit counselor will not have any horrible affect on your credit score, since in the end, it's just talk. Help should be a great thing, no? How can obtaining some credit counseling harm you? Receiving credit assistance alone will not hurt your FICO number, but it will almost certainly scare would-be lenders away. It is the actions the credit counselor may take that might harm you, especially if you set up a debt repayment plan through the agency. Once you sign up on a debt repayment plan, your credit report will indicate that you are getting credit counseling. Establishing a debt repayment plan is a frequent thing to do; a lot of professionals will negotiate a deal with your financial institutions to accept payment over a longer period or even to accept less money. Financial institutions are funny - they will continue to issue credit to just about anybody who can keep making the monthly payments, but as soon as those debtors start searching for professional help, the lenders run away. Once you set up a repayment plan, lenders will now view you as "damaged goods" or a potential risk and you may end up unable to borrow money from any company for any reason at all.

In spite of the fact that you are working with them to pay them back to their satisfaction, your FICO score will be impacted if you settle for only a portion of the full amount. If your creditors decide to settle for less than the full amount that you owe them, they will report this to the credit bureaus, which will show up on your record, accurately, as unpaid debt. The aspect of credit guidance that can hurt your FICO figure is what happens when you actually negotiate with your creditors.

Does the possible harm to your credit score mean that financial counseling is a bad plan? Just be aware that the help you get may include a short-term price. Most of us never obtain any formal financial education in school and anyone who is in money trouble could benefit from getting some solid assistance regarding the management of home finances. No one enters credit assistance unless they already have headaches that are greater than the ones you will have when your score goes down. Remember - you can always build your score back up over a period of time, so get the assistance you need when you need it.