What Is the Effect of a Credit Counseling Program on a FICO Score?

With so many credit repair resources and debt management programs available to consumers, deciding which one is right for you can be a challenging decision. Take the guess work out of credit counseling and debt management programs and learn how such programs help or hurt your credit score.

Effects

There are a variety of credit counseling and debt management programs available to consumers. While you may be hesitant to join such a program for fear that it could adversely affect your credit score, you need not worry. According to FICO.com, "Using a credit counseling service and having this situation reported in your credit report should not have any negative impact to your FICO score."

Considerations

The only way a credit counseling or debt management program could adversely affect a credit score is if you were to take a misguided action based on the suggestion of a credit counselor. Settling a debt obligation for a lesser value or failing to maintain a low debt-to-income ratio over the life of a program are examples. In other words, the actions you take during a program could lower your credit score, not the program itself.

Program Options

Joining a credit counseling or debt management program does not erase late payments and potentially negative items from your credit file. Instead, such programs help you to gain financial strength through debt management, debt consolidation, budgeting and credit counseling. Using a range of credit repair tools, your credit counselor or debt manager will teach you to use credit more wisely. This will in turn help you to improve your credit history and increase your credit score.

Credit Repair Tools

A credit counseling or debt management program can help you set up a repayment plan so you can satisfy your outstanding debt obligations more quickly, work with credit card issuers to reduce high interest rates, negotiate the removal or reduction of penalty fees and dispute incorrect items on a credit report. All of these actions can help to improve your credit score over time.