How does credit counseling affect credit scores?
There are many different views on this. Here is some useful data on how to determine for yourself whether credit counseling is good or bad for your credit score.
Craig Watts, Public Affairs Manager at Fair Isaac Corp. (FICO), has stated that it is not their goal to have consumers consider credit counseling to be detrimental to their FICO scores.
This is good news; however, if the credit counselor negotiates a lesser contractual obligation, it is the lender who decides how to report that new obligation to the credit reporting agencies.
An example would be if your $400 monthly payment is now renegotiated for $300, the creditor may do one of two things. Legally report you as $100 in arrears every month or report the account as up to date.
If the lender has chosen to report your account up to date or current, your credit standing is good. If the lender chooses to report it as delinquent, it is viewed negatively. If everything is current the FICO scores are not affected by the credit counseling report that may be in your file.
Although credit counseling does not by itself influence your credit score, it is apparent on the report that you are in counseling or have participated in credit counseling. Therefore it is once again up to the individual lenders who review the report.
If the lender manually looked at your credit report and saw that debts were being repaid through a debt management program, they probably wouldn’t open a new account for you.
More good news, most lenders these days will never see your actual report. Larger lenders don’t take the time to do a manual review. There are some small creditors that may do this as they do not depend on the use of automated scoring systems like the larger lenders.
Hopefully, this information is useful in making that decision to seek credit counseling.
There is also the possibility that you have unclaimed money. Do a free money search. In the United States it is estimated that nine out of ten people are owed money. Every state has unclaimed property that is waiting to be claimed by the rightful owner.
