Is Credit Counselling Going To Affect Your Credit Score?

Written by admin on December 6th, 2010

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I come across my clients asking me whether the debt can be painlessly eliminated after they see so many ads over television or newspapers as they feel too good is hard to believe. For this my answer is yes.

Credit counselling is a way to get out of debt painlessly. Many people often mistake understanding debt settlement and credit counselling is one and the same, but it is not the like. Credit counselling is different from debt settlement in that counselling works by negotiating interest rates, payments with lender while debt settlement is where the debt settler will negotiate to make an agreement to pay lesser than what you owe.

Credit counselling is often negotiated by third party on behalf of you, for fee, to reduce the amount borrowed and interest charged on debt in a way to avoid bankruptcy.

Credit counselling helps for people who are deep in debt and one who wants a professional help to clear the debt. Credit counsellor is one such person who can help you in managing or eliminating debt stress. By hiring credit counsellor you admit that you are unable to handle the debt on your own and decision to hire credit counsellor is as tough as decision to file bankruptcy.

Many people get worried about credit score when hiring a credit counsellor. This is because many have an opinion that having a credit counselling will impact their credit score. But it is not right. By taking help of credit counsellor, your intention is to manage debt and get hold of your finance correctly. Here you are neither receiving any kind of assistance from law nor declaring any kind of your financial status. You are not declaring that your liabilities surpass your assets or liquidating assets to meet the debts. Instead you are merely taking advice and guidance from third party in an attempt to control your finance.

Yes, to some extent having a credit counselling can influence your loan officer when you approach him for a loan as they see one goes for credit counselling only when there is a problem managing finance and this is purely dependent on the lender you are dealing with. Therefore FICO have no idea about whether you had a credit counselling or not and this will not impact your credit score in anyway.

But, remember that some of the measure that your credit counsellor suggests to take action may impact your credit score and the suggestion will lot depends on your financial status. If you approached the credit counsellor early then the extent to which he goes to manage your debt will be lower and if you approached them when you think of filing bankruptcy then the their suggestions may definitely impact your credit score but not as much as bankruptcy.

Therefore, you must be careful of two things, one is you must choose reliable and experienced credit counsellor like and the other is approach the service as early as possible before things go out of your hand.

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