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Can Credit Counseling Hurt Your Credit?

Can Credit Counseling Hurt Your Credit?


    

Can Credit Counseling Hurt Your Credit?

by Arlene Schneider

Debt management plans are being talked about frequently today as people go through downsizing in the corporate workplace and foreclosure. But what is a debt management plan and what can it do for you? Simply put, a debt management plan is a form of debt consolidation.

Pay your debts yourself-many people think this is the only way and it can be done. This plan takes a lot of discipline and not everyone has that. You have to make a detailed list of who you owe, how much, your monthly minimum payment and your interest rate. You make minimum payments on all accounts except the one with the lowest balance. On this account you pay as much as you are able. Once it is paid off, you do the same thing again. You should be putting all extra money to the account you are currently paying off. This will work best if you cut back on your expenses and increase your income. This method will keep your credit in tact and will teach you good money management.

Debt settlement is a viable option if you have a lot of debt or if your debt is old and has not been paid on in more than 6 months. In this situation, bankruptcy may be a better option. Debt settlement will look better on your credit than bankruptcy, but it is something that should be entered into very carefully. Consumer credit counseling is your second option and this is a form of debt consolidation that does not require a loan. You make one monthly payment to the credit counseling organization and they disburse it to your creditors. This debt relief option will work if you are not more than 3 months behind.

Credit counseling, in most cases will have little or no negative impact on your credit report. Some creditors will add a comment to your credit report stating the account is in credit counseling. At first you may see your credit score decrease, due to all your accounts being closed and the amount of your balances. But as your balances decrease over time, your credit score will increase.

There are some programs that will allow you to enroll with as little as $2,500. I am not saying that everyone that has that amount of credit card debt should enroll. It should be based more on your debt-to-income ratio, but it is there if you need it. A debt management plan can have you on your way to becoming debt free.

About the Author:
Learn more about free credit card debt relief. Stop by Arlene Schneider's site where you can find out all about credit card debt counseling and what it can do for you.


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