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Credit counseling agencies can help or harm your credit score.
Most everyone knows that credit counseling is now required as a prerequisite to filing for bankruptcy. And while counselors are currently quite busy dealing with the bankrupt, we need to remind our readers that they are there for other reasons, too. Counseling can help anyone with financial problems; especially those with a larger than average share of debt. They can help you organize your finances, establish a budget and pay off your bills in a manner that will be acceptable to your creditors. But watch out - there is a downside to credit counseling. It could hurt your score and affect your ability to borrow.
How can getting some help hurt you? Help should be a good thing, right? Well, true. And just talking to a credit counselor will not have any negative affect on your credit score. After all, it’s just talk. It’s the actions the counseling agency may take that could hurt you. The problem comes if you set up a debt repayment plan through the agency. This is a common thing to do; many agencies will negotiate a deal with your creditors to accept payment over a longer time or even to accept less money. Once you sign up on a repayment plan, your credit report will note that you are receiving credit counseling. That alone will not hurt your score, but it will almost certainly scare potential lenders away. Lenders are funny - they will continue to issue credit to just about anyone who can keep making the payments. As soon as those people start seeking professional help, the lenders run away. They will now view you as “damaged goods” or a potential risk and you may find yourself unable to borrow money from anyone for any reason.
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