Q: Will credit counseling affect my credit?

A: Credit counseling can mean many things, but when most people use the term, they're referring to debt consolidation or debt management plans. When you enter into these programs, a credit counselor will collect all of your bills and then contact each creditor and let them know that you are working on paying. They then negotiate with each creditor to have late fees waived or have your interest rates lowered. You then make payments to the debt management company so that the calls from creditors stop. But how does this effect your credit?

Well, it will show on your credit report that you didn't pay off your creditors according to the terms of your original contract. All the accounts that are involved with your debt management plan will be marked as, ""does not pay account as agreed."" This might sound threatening, but it's actually a lot better than a ""charge-off,"" how your credit report is marked when you fail to pay at all, or especially a bankruptcy.

It's always best, of course, to pay your bills on time each month, but that's just not always possible. Problems crop up, and despite your best intentions, you might get behind on your bills. If you can keep on top of your debts, do so, but if you've just fallen too far behind, credit counseling can really help. So if you use a credit counseling service, you will have a blemish on your credit report, but it can be much less serious than the alternatives, especially that last resort, bankruptcy. Always consider all of the angles before you start a debt management plan.

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