How Credit Counseling Influences Your Credit, Even If It Does Not Directly Lower Your Credit Score

GREAT! You’ve decided to finally do something about the tens of thousands of dollars you have in credit card debt.  It is no longer enough to make minimum monthly payments and reduce balances slowly. You’re done with that!

You want to put your debt reduction strategy into hyperdrive, without dinging your credit in the process. After all, in the near future, you might want to buy a new car, upgrade your cell phone, or refinance your home.

But before deciding on a plan of action, what you really need to know is: How does credit counseling influence your access to credit and your credit score?

What is Credit Counseling?

Credit counseling is a method of paying off large amounts of unsecured debt with the help of an intermediary. The company works with creditors to lower current interest rates and waive late fees. The program requires that you pay off 100% of your credit balances plus some interest in no more than 60 months.

Even though you are paying your balances in full, a debt management plan, through a credit counseling program, will have both a direct and indirect impact on your access to credit and your credit score.

What Factors Impact Your Credit?

Credit scoring companies use five major factors when calculating your credit score. Companies consider activities such as payment history, use of credit, overall credit history, new credit, and the credit mix. Newer scoring models also review less concrete things like credit trends.

Here is a look at both the direct and the indirect impact of credit counseling on your credit score:

The Direct Impact of Credit Counseling on Your Credit

The transition period: It is common to miss payments during the transition to a debt management plan. To avoid this problem, continue making minimum payments until the credit counseling company confirms your new payment schedule. You remain responsible for the debt payments even if the credit counseling company pays the account late.

Closed accounts: Credit counseling requires that you close all accounts entered into the debt management plan. A closed account, with a balance, will hurt your utilization ratio (use of credit) until you pay off the debt.

Calculation period: Debt repaid through credit counseling remains on your credit file, impacting your credit score for seven years.

The Indirect Impact of Credit Counseling on Your Credit

Notation on your credit file: The notation on your credit file is not part of the credit scoring calculation. However, its presence can lead to rejected applications because most lenders will not approve new debt to someone in a debt management program.

Credit history: Credit scoring relies heavily on current payments. When you close the majority or all your credit accounts, you might not have any new positive activity to reflect your current financial situation.

Because of the difficulty in obtaining new credit, you might find it necessary to resort to co-signed or secured debt to reestablish your credit.

The inability to apply for new credit can delay credit recovery. It is difficult, and sometimes impossible to obtain new credit while in a credit counseling program, even if you are making on-time payments.


While credit counseling is not a factor in the credit score calculation, it can have a significant negative effect on your credit and make it difficult to rebuild your credit history and credit score while in the debt management program.

About Titan Consulting Group

Titan Consulting Group helps consumers evaluate various debt relief options and choose the right program that best fits their short-term and long-term financial goals. We work with consumers seeking debt consolidation loans, or who may be considering options like debt negotiation or bankruptcy. Through our network of partners, we can help you find the right solution to reach your goals and get back to living a life free from high interest credit card debt.

Contact us today at (888) 488-4517 or Apply Online now.