Credit Counseling and Your Credit

As millions of Americans continue to struggle with the financial burden of debt, more and more consumers are looking to credit counseling to find a real way out of debt. Credit counseling allows consumers to consolidate debt into one low monthly payment, regardless of their credit scores. With reduced interest rates on their unsecured debts, consumers can reduce debt quickly – often getting out of debt in just five to seven years, instead of the few decades it would take using traditional payment methods.

One of the main benefits of credit counseling is the fact that it allows a consumer to consolidate debt even if they have bad credit. Most consolidation options require you to have good credit in order to qualify at the right interest rate. By contrast, your credit scores are not a factor for enrolling in a debt management program through a credit counseling agency. Since the credit counselor negotiates with creditors and acts on your behalf, your credit scores are not a factor in getting approved for the program.

Although this make a debt management program a more accessible debt consolidation options versus other debt solutions for a wider range of consumers, it also leads other consumers to be concerned over the affect credit counseling will have on their credit scores moving forward. If your credit scores have not yet been affected by your financial hardship and are still high, you may have a concern that a debt management program will negatively impact your credit rating.

In truth, there is no credit penalty for paying your debts back on the adjusted payment schedule you get with a debt management program. In the U.S. credit system, creditors do not penalize you for paying debts on a different schedule – as long as you pay back everything you owe. As a result, as long as you make the payments to the program on time, you can use a debt management program through a credit counseling agency without incurring any credit penalty.

What’s more, some consumers who have lower credit scores actually see an improvement in their credit scores upon successful completion of a debt management program through a credit counseling agency. If your scores are low then reducing your total debt owed and improving your payment history by making payments on time to your program can actually improve your credit scores. Since debt owed and credit history account for two thirds of your credit score calculation, improving these two factors through credit counseling can provide a big benefit.

Connie Solidad has been writing about finances and debt consolidation for years. She’s an expert in the industry and writes about credit counseling and debt management options. When Connie is not working, she loves playing with her two dogs in Tampa, Florida. To learn more about debt consolidation counseling refer to