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Does Credit Counseling Hurt Your Credit Rating?

by Peter Andrew


Credit Counseling Hurt Your Credit Rating?


your credit card debt has become a problem that you can't seem

to fix, you may be tempted to use a credit counselor to help

you lower your monthly payments. However, this could harm your

long-term credit rating, according to Jane Shebroe, Branch Manager

for 1st

Metropolitan Mortgage in Little Falls, New Jersey.


have had many credit-counseled consumers looking to refinance,

or purchase a home. In the process, they were devastated to

learn that their credit history was badly damaged because of

credit counseling. They claimed the credit counselors never

told them that this would happen.

Under each

negotiated item listed, their credit report reads 'In Credit

Counseling.' Most banks and creditors will turn down a loan

application if those three words appear on the credit report,

regardless of good credit scores.

If a loan

does get approved after credit counseling, the interest rate

and monthly payment will most likely be very high. The lender

will view this borrower as a high risk. Therefore, the lender

must charge a high interest rate to justify taking such a risk.

Many lenders risk a credit-counseled consumer the same as if

in bankruptcy."


says that while many credit counseling services promote their

non-profit status, this should not be seen as a sign of greater



Published 08/23/05 (Modified 05/07/12)

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