Ask Jean Thursday: Credit Counseling - Jean Chatzky - Making money make sense
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Ask Jean Thursday: Credit Counseling

istock_000007660350xsmallI am curious about consumer credit counseling. Can you tell me how it affects your credit? Is it as bad as filing bankruptcy?

-Kelly, Oldsmar Florida

You’re right-using consumer credit counseling to manage your debts can potentially affect your credit score. What may surprise you, however, is the fact that when your score is calculated using the FICO scoring model, whether or not you’ve received counseling won’t affect your score. “Any notation on a consumer credit report indicating that the consumer is or has been involved in credit counseling is ignored by the FICO scoring model,” says’s Curtis Arnold.

However, what you do with the advice you get from your consumer credit counselor is another matter. For example, if a counselor advises you to manage your debt or credit cards a certain way, and you follow through with that advice, it could potentially have a negative impact on your score.

One thing is for certain though; getting credit counseling will have much less of a negative impact on your credit than bankruptcy will. “The negative impact of credit counseling is fairly minimal, whereas a bankruptcy has HUGE negative implications. For example, according to Credit Counseling of Arkansas, your score can drop as much as 100 points if you file bankruptcy,” adds Arnold.

If you decide to move forward with credit counseling, a good way to start looking for help is through the National Foundation for Credit Counseling. The NFCC is a national, nonprofit network of counselors whose mission is to help you get out of debt. Through the NFCC, counseling is available by phone, online or by mail. The cost of counseling varies depending on the level of support you need and also on your state’s laws. Most of the time though, you can get counseling at no or low cost. To find a counselor near you visit the NFCC’s website by clicking here.

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