Does getting credit counseling affect your credit score?

Getting professional help to get out of debt is an important step for many people who find themselves too deeply in trouble to handle repayment of loans and bills on their own. You should always consider going to a reputable credit counselor who can help you make a budget, gain control of your finances, and get back on your feet. Simply meeting with someone to go over your personal financial history and get advice will not affect your score in any way.
However, it is important to note that many credit counseling agencies arrange for their clients to enter special debt repayment or settlement programs. In that case, your creditors will be informed, and while some may be pleased that you are facing your problems, they may still, “put a note in your credit report saying you’re participating in a debt repayment plan” , making it difficult for you to get additional loans until the repayment is over. Keep in mind that it is necessary for the credit counselors to contact your creditors, so they can negotiate for lower interest rates and new terms that will help you pay off what you owe. Besides, if you are in deep debt, you shouldn’t be taking out new loans anyway, until the old ones are cleared away. Once you’re done with your repayment, you can follow up to make sure the designation is removed from your current financial history and move forward without that black mark on your report.

In addition, it’s important to know that there is a difference between debt repayment and settlement. Settlement is a more serious step, where your agency, “asks your lenders to accept less money than they are owed”1. Sometimes it is necessary to go to those lengths to be able to get your debt under control, but you should first understand that your credit score would be affected negatively for the next seven years that your settlement status is on record.

To ensure that your credit counselors are giving you good advice, it is always best to work through a nonprofit or low-cost agency.



Laura Gutmann

Laura Gutmann

Laura Gutmann is currently a PhD student in Education at the University of North Carolina-Chapel Hill. As part of her studies, she hopes to focus on creating better resources and training materials for teachers.

Previously, she worked as the Vice President of Programs for Junior Achievement of New York. She was responsible for reaching 95,000 K-12 students per year with financial literacy, workforce readiness, and entrepreneurship programming. Her team organized events for schools across the five boroughs of New York City, facilitating positive relationships between classrooms and the community. Ms. Gutmann has extensive experience building curriculum focused on life skills, and has partnered with dozens of corporations to train their employees to become volunteer role models.

Ms. Gutmann also created resources for both students and educators during her time as a kindergarten teacher in the South Bronx. She first entered the classroom through the Teach for America corps, and went on to receive her M.S. Ed. in Early Childhood from Bank Street College. She has developed web resources, professional development sessions, and parent workshops, and served as a graduate-level writing tutor and resume coach.

Before becoming a teacher, Ms. Gutmann studied Public Policy at Duke University, where she received her B.A. in 2002. She worked in Durham Public Schools as a reading tutor and photography teacher. She also spent time doing research for the American Federation of Teachers, and served as a consultant for the Wake Education Partnership.

Ms. Gutmann currently resides in Chapel Hill with her husband and her dog, a poodle named Noodle.
Laura Gutmann

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