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Debt Management

Credit Counseling

Make the Most of Your Credit Score


Credit Inquiries

Anytime a lender, creditor or employer checks your credit report, an inquiry is created. Although the number of recent inquiries is not a major factor in a credit score, too many inquiries in the last six months to a year can negatively impact your score so it's best to avoid applying frequently for new credit.

The following types of inquiries do not hurt your credit score:

  • Consumer-initiated inquiries, which occur when you order your own credit report or score.
  • Promotional inquiries, which are created when your file is reviewed for a pre-approved credit card or line of credit.
  • Employment or insurance related inquiries.

To avoid penalizing consumers who shop for mortgages or car loans, inquiries for these types of loans within a short period of time are grouped together and often count as a single inquiry. There is no such buffer, however, for inquiries generated by applying for credit cards. 


How Will Credit Counseling Affect My Credit Score?

Many people worry that their credit will be damaged if they enter a debt management program through a credit counseling service. In fact, their credit score may stay the same or actually improve if they successfully stick to the repayment plan. There are several reasons for this:

  • Fair Isaac Co., creator of the widely used FICO scores, does not consider the fact that a consumer is in a counseling program when calculating a credit score.
  • Many creditors will not report anything to the credit bureaus that indicates that an account is being repaid through a counseling agency.
  • Some creditors will "re-age" accounts that are behind when a consumer enters a counseling program and sticks with it for several months. That means the late payments immediately prior to beginning the counseling program may be removed.
  • By entering a credit counseling program you may avoid further late payments, credit problems and even bankruptcy - all of which can significantly hurt your credit.
  • If you successfully pay down your debt through a counseling program, your credit score can improve since the amount of debt you carry is one of the major factors in calculating a credit score.

Warning: While you are paying your debts through a counseling agency, you still remain legally liable to the creditor for those payments. If the counseling agency pays creditors late, or doesn't pay them at all, your credit report will suffer. Choose a reputable counseling agency with a track record of paying creditors on time. 
 


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