Does Credit Counseling Affect Your Credit Score?



Fair Isaac is the company that created the FICO scoring method. Several years ago, they conducted research that concluded that people who enrolled in credit counseling did not default on debts more often than the general population. Based on this conclusion, Fair Isaac revised the scoring system. A mention of credit counseling no longer reduces your score. Individual lenders may however notice the entry when reviewing an application. This is a choice within each lender’s discretion. The impact is far less than a history of late payments.

The FICO scores calculation combines numerous factors. Lender inquires may affect your score. If you move often, you score is affected. The greatest impact however is the number of late payments made over the last three years. If you are two months past due, one time, it reduces your score more than one month past due, two times. The best practice is to make payments on time.

Credit counseling services offer a wide range of services designed to eliminate late payments and repay debts. As a first course of action, counselors may recommend a new monthly budget. New budgets do not necessarily require sacrifice or reduction in quality of life. For example, counselors are masters with cost cutting tips, including ways to purchase the same goods and services for lower costs. They may identify redundant insurance coverage or know free resources you may use to replace existing fee-based services. They may recommend establishing direct deposits and direct payments automatically to reduce existing payments.

The goal of every credit counselor is to provide an unbiased opinion about each client’s situation and recommend the most effective solutions. Towards this end, the best companies employ highly experienced counselors. Experience is the best teacher. Over time, counselors develop a high degree of professional expertise.

You will recognize the best companies quickly. They encourage phone calls, seven days a week, day or night, and a real person answers. Help is only a phone call away. You should feel welcome to call anytime.

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