Misconceptions of Credit Counseling

There is a big misconception regarding what is reported to the credit bureaus while you are on a credit counseling program. Credit counseling is designed to assist people who are in a financial bind. Banks may report to the credit bureaus that your accounts are handled by a debt management agency. This is not the same as filing bankruptcy which is a common misconception.

One of the most important factors that the credit reporting agencies consider when determining your score is timely payments. This shows lenders that at one time you may have gone through a little financial distress but now have opted to take care of your financial obligation rather than possibly giving up an defaulting on your agreement with your creditors.

When your accounts are behind, by enrolling with a credit counseling agency you can get most of your accounts re-aged, in other words brought back to a current status. Once you establish an agreement to pay back your obligation and your payments are timely every month, with time your credit score will show that you are on the right track. On the FICO website myfico.com under “What do FICO scores ignore” it clearly states credit counseling does not affect your score provided you are making timely payments.

Do not get the wrong idea that just because that is stated it means that your score is perfect. In order for this program to work, you must make your payments every 30 days as your creditors require and it is also your responsibility to read all your statements to make sure that the information is correct. If a problem is spotted you must notify your debt-counseling agency immediately. Companies such as The Credit Counseling Foundation likes to establish a relationship with all of their clients and they must work as a team to accomplish the main goal which is to give you the freedom of living a debt free life.

For more information or to receive a FREE debt reduction consultation Click Here