If you’ve been struggling to keep up with your debt payments or need some professional advice about your credit, you may have considered talking to a credit counselor.
Credit counseling agencies have been around since the 1950s but have become more prevalent in the last few decades as more consumers find themselves sinking into debt or considering declaring bankruptcy.
In addition to educating you about debt and credit, credit counselors can play an active role in negotiating with your creditors to make your payments more manageable. Does credit counseling affect your FICO score? Here’s what you need to know:
Factors that Don’t Affect Your FICO® Score
The major credit bureaus take several factors into account when calculating your credit score, including your debt-to-credit ratio, your payment history, the amount of new credit on your account, the length of your credit history and the type of credit used.
Each factor has a different percentage ranging from 10 to 35 percent and the final score is calculated based on a proprietary formula. If you seek credit counseling to reduce your monthly payments and adjust your payment plan, you may be wondering whether this will be reported to the credit bureau.
MyFICO.com reports that even though several different types of information play a role in calculating your FICO score, credit counseling isn’t one of them.
You can safely seek out credit counseling to reduce your interest rates and payments so that you don’t fall behind. For many people, credit counseling is the best way to preserve their credit score and prevent any drops in the credit score because it allows them to keep up with at least their monthly payments and slowly chip away at their debt load.
Even though seeing a credit counselor won’t hurt your FICO® score, counseling is just one step in the right direction to help you get out of and stay out of debt – if you have a problem with debt and can’t seem to limit your spending, you will need to adjust your spending habits so that you’re not still contributing to your debt load in any way.
Read: Does The Type of Debt I Have Impact My Credit Score?
Remember that your credit score is also based on the amount of debt and type of debt you are carrying.
Credit counselors can help you get back on track temporarily, but it’s up to you to make significant changes to your lifestyle so that you stay out of debt for the long-term and can meet all of your financial obligations consistently.