Will credit counseling hurt my credit score?
Question: “I am thinking about using a credit counseling service to help with my debts, FICO scores and such. Does this kind of counseling hurt my credit score in any way? I’ve heard good and bad things about it, which leaves me a bit confused.”
It depends on what you mean by “credit counseling.” The so-called credit repair companies can get you deeper into debt, and do serious damage to your credit score. But a legitimate counseling service will not hurt your score at all.
If you were work with a reputable non-profit counseling service (like the ones recommended here), it probably won’t affect your score one way or the other. These organizations usually help you come up with a workable solution to get out of debt, improve your credit, etc. But they generally don’t do anything that could affect your credit score.
On the other hand, if you work with a less reputable company (which includes most of the “credit repair” industry), you could end up doing things that would hurt your credit score. For example, many of these companies tell their clients not to communicate with their creditors. They say “we will handle that for you.”
In many cases, these companies take payments from their clients and do very little in return. Or else they’ll hold the payments intended for creditors until you are seriously past-due on the account, and then try to negotiate a settlement on your behalf. This practice can definitely hurt your credit score, because the original creditor will likely report the missed payments to three reporting agencies.
Genuine credit counseling services are mostly educational in nature. They don’t usually handle payments for you. As a result, this type of counseling won’t hurt your credit score — or at least it won’t cause any major changes in the score. On the contrary, some of these educational programs are designed to help you improve your score.
You might also wish to read our fact sheet on the credit repair industry:
5 Reasons to Avoid Credit Repair Companies (PDF file)
I hope that answers your question and gives you some things to think about. Good luck.
Disclaimer: We are not making any guarantees about the debt / credit counseling services. Without knowing the full details of a particular program, there is no way we can say if such services would hurt your credit score in some way. You must get all the facts about these programs, before choosing to enroll.
Similar Posts:
- Is Consumer Credit Counseling Right for You
- The Problem With Debt Settlement Companies
- How To Reinvent Your Life With Credit Repair?
- Credit Report Repair – Watch Out for the So-called Experts of Credit Reporting
- How to Manage Credit Report Score Effectively?
