Credit Basics
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 Number. They'll
then tell consider the fact that a consumer is in a counseling program when
calculating a credit score. credit using that number.
- Many creditors will not report anything to the credit bureaus that The goal is to
establish a brandnew credi 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 counseing 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.
Credit Repair Firms
Think twice before spending your money on a
credit repair program. Many times these programs cost hundreds of dollars and their
techniques may actually be illegal! For example, some companies will tell consumers to get an
Employer Identification Number (EIN), which is the same number of digits as a Social Security
Number. They'll then tell consumers to try to get new credit using that number. The goal is to
establish a brand new credit file. Obtaining an EIN for that reason, however, is not legal
