How Does Credit Counseling Affect My Credit Score?

When you contact a consumer credit counseling service or undergo a debt management plan, this action does not negatively impact your credit score.  At one time it did, but FICO made changes years ago to their scores, which was an advantage to consumers. Bankruptcy laws require individuals filing for bankruptcy to undergo credit counseling within 180 days of filing for bankruptcy. Credit counseling is considered a positive move to take care of your debt instead of filing for bankruptcy.  The creditors have a better chance of getting some money if you contact to a credit counselor.

Your current and past credit behavior harms your credit score.  If you are considering contacting a consumer credit counselor, you probably have somewhat poor credit already.  If the credit counselor negotiates with lenders for amounts less than you owe, it will be reported as a settlement. This will negatively impact your credit. It is a better alternative than continuing to miss payments, have accounts charged off, sold to collections or the worst – file for bankruptcy.

If you are paying on time but making minimum payments and have high debt, it is better to see a credit counselor as soon as possible for advice. You may be able to work out something with your creditors on your own and avoid anything negative as a result, without any impact on your credit score.

Since non-profit consumer credit counseling services are supported by major lends, they may view it is a positive step. Other lenders reviewing your credit report could look at it differently and consider it negative. Manual review of your credit report doesn’t happen very often, usually when you apply for a mortgage.

Consumer credit counseling does not impact your credit score. How you have paid your bills before you contacted them impacts your score.  Just the contact with them does not, so contact them if your need the assistance.

John Ulzheimer is the President of Consumer Education at, the credit blogger for, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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