Credit counseling and your FICO score

Depending on what your financial advisor does, credit assistance could harm your credit score. Getting credit counseling is generally regarded as a wise move in financial circles, but it could send potential creditors running.

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Credit assistance can help anyone with problems with debt; particularly those with a larger than average share of outstanding debt. Most everyone knows that credit counseling is now required as a prerequisite to debt relief in court. Financial professionals can help you organize your finances, establish a budget and repay your bills in a manner that will be acceptable to your creditors. While there are benefits to receiving credit guidance, there is a downside to credit assistance, as it could hurt your FICO score and impact your ability to borrow. While counseling agencies are currently rather busy dealing with the bankrupt, we need to remind our readers that credit counselors are there for other reasons, as well.

Help should be a good thing, right? Merely talking to a credit counselor will not have any negative affect on your credit score, since in the end, it's just talk. How can obtaining some help hurt you? Obtaining counseling alone will not harm your FICO, or credit score, but it will certainly scare potential lenders away. Once you sign up on a debt repayment plan, your credit report will indicate that you are receiving financial counseling. Establishing a debt repayment plan is a popular thing to do; many agencies will negotiate a deal with your lenders to settle for payment over a longer time or even to accept less money. It's the actions the counseling agency may take that might hurt you, especially if you create a repayment plan via the agency. Once you establish a debt repayment plan, lenders will now view you as "bad news" or a potential gamble and you may find yourself unable to obtain funds from anyone for any reason. Lenders are funny - they will continue to offer credit to nearly anybody who can keep making the monthly payments, but as soon as those individuals start seeking professional assistance, the lenders disappear.

In spite of the fact that you are working with them to repay your creditors to their satisfaction, your credit score will be impacted if you settle for only a portion of the full amount. The part of credit assistance that can harm your FICO ranking is what occurs when you actually negotiate with your creditors. If your creditors decide to accept less than the full amount that you owe, they will report this to the credit bureaus, which will show up on your report, accurately, as unpaid debt.

Does the potential harm to your credit score mean that credit counseling is a bad way to go? Most of us never get any proper financial training in school and any person who is in financial trouble would benefit from obtaining some solid help regarding how to manage home finances. Just be aware that the assistance you obtain may come with a short-term price. Keep in mind - you can always build your score back up in time, so get the assistance you require when you need it. No one enrolls in financial counseling unless they already have problems that are greater than the ones you will have when your FICO score goes down.