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The fact is that credit counseling programs are typically looked upon as good things by lenders and renters, as they demonstrate a willingness to take on personal responsibility and accountability that lenders and renters are most interested in.

A credit counseling program will only significantly affect your credit if one is including a bankruptcy within the program.

Fico Scores are No Longer Affected by Credit Counseling

According to Craig Watts of Fair Isaac, which created the FICO credit score that most lenders use,

“When we first introduced the FICO score in 1989 through the credit bureaus, the score did pay attention to mentions of credit counseling on the credit report, and they could slightly lower the consumer’s FICO score. In response to changes in consumer behavior, in about 1998 we changed the FICO scoring formula so that it ignored all such references to credit counseling on the credit report.”

However, while credit counseling companies do not report your seeking of credit counselor for debt management, one or more of your creditors whose accounts are being included in the debt management program might choose to do so.

If they do, this reporting on their part could possibly lower your total credit score.

But even if they choose to make such a report–and many choose not to, anyway–there is no numerical lowering of your credit score rating.

But there is usually a drop in your score if you are deliquent on a debt or whenever you just inquire with a lender or renter about potentially getting a loan or rental from them (that is, when you allow them to run your credit report).

What Creditors May Do

If a creditor does choose to report your credit counseling activity, what they will do is effectively have a note placed beside your outstanding debt to them stating that you are effectively in debt management with regards to this debt.

That note immediately comes off of your credit report when your debt to them is fully paid off.

This note in your credit report will be seen by any potential lender or renter. It is up to them to personally decide if they consider the note to be of any significant meaning about your credit character.

However, it is very important to distinguish between credit counseling or debt management programs from debt settlement programs. Debt settlement programs are entered into in order to try to get creditors to accept a deal–a deal for less money to them than you actually owe them.

Debt settlement programs are automatically seen as negatives against you, although not as bad as bankruptcy programs are, and these will negatively affect your credit score. See how debt settlement affects your credit score.

Related Articles:

• Be Warned of Debt Consolidation Scams
• Can You Have Too Much Debt to File for Bankruptcy?
• Credit Card Payment Problems?
• Debt Consolidation Definition
• Debt Consolidation for Non-Homeowners

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