Consumers seeking debt relief through credit counseling assistance programs often are able to find solutions to various credit difficulties and debt relief assistance that will not hurt their credit score in a way that puts them in a situation where they are struggling in their financial life simply because they needed assistance repaying these debt obligations. Credit counseling can help budget a consumers monthly finances and debts to a point where they can either begin repaying what they owe in a more efficient manner or, if it’s needed, a debt management plan may be used to help individuals who are simply not in a financial position to erase their debts.
Traditional credit counseling will simply help consumers set up a repayment plan so that they can meet their monthly obligations related to debts with their income. Obviously, there are those who have spent beyond their means to repay, but consumers who simply may need outside help organizing their finances so that they can erase debts and meet financial goals in the future could benefit from these credit counseling agencies as they could offer more cost-efficient methods for handling one’s personal finances.
Typically, credit counseling does not harm a consumer’s credit score as a counseling session usually just entails advice and repayment strategies that consumers may use to meet debt obligations within their financial means. However, there are also some debt management plans, which may be necessary for certain consumers, that will not cause the credit score of the consumer to drop as these plans typically structure a repayment agreement that will not result in a consumer paying less than they owed, but may lower monthly payments or interest rates.
There are some arguments that debt management plans can negatively affect one’s credit score as accounts associated with a debt management plan are usually closed, so if a consumer closes lines of credit on unsecured cards, for example, this could cause their score to drop. Obviously, this is something to be discussed between a consumer and a credit counselor before a debt management agreement is reached, but advisers typically point out that simply having an item reported on one’s credit score as having been paid through a debt management plan will not negatively impact one’s FICO score.
Yet, when it comes to a debt management plan, missed payments will obviously cause a consumer’s score to drop, so for this reason, consumers are always advised to do a great deal of research on credit counseling agencies that they want to use for their personal financial situation. There are scams that look like credit counseling programs and may even offer debt management plans, but again, some of these organizations may make payments late or there have been companies in the past that have kept payments, so finding a reputable institution which will help manage one’s financial troubles is the first step. Yet, if a debt management plan is needed after credit counseling, inquiring about how this plan will affect one’s personal situation is also a good step to avoid any financial drawbacks related to this form of assistance.