How does credit counseling affect credit

How does Credit Counseling affect credit?

Credit Counseling programs do affect your credit report and asking how credit counseling affects credit is a common question. It is said by many that Consumer Credit Counseling will not affect your credit score, and while that may or may not be accurate, it has a larger effect that Credit Counselors don’t want you to know. When you are accepted into a Credit Counseling or Debt Management program your creditors will freeze your charging privileges and may report this to the credit bureaus. Additionally, nearly all creditors will report to the credit bureaus that you have entered into a “hardship” or Credit Counseling Program. Although this is far less damaging than bankruptcy, it definitely does impact your overall credit rating. Potential lenders will not lend you money and have made the claim that its like a Bankruptcy. You may also fall delinquent for a short period at enrollment, which will have a negative effect on your credit score. Just the simple fact that you resorted to a credit counseling program will be a red flag for prospective credit grantors.

A Credit Counseling program may be effective for people who want get out of debt and can afford to make slightly higher monthly payments relatively comfortably for the next 3 to 5 years. If you can continue to pay the higher monthly payments and do not foresee future financial problems, Consumer Credit Counseling is an okay way to go. If you are currently struggling to make minimum monthly payments, it is unlikely you will succeed using this method.

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