There may be a lot of misinformation when it comes to options for debt relief, and that means that most people will make a decision about finances based on wrong or incomplete information. This can cause people to fall into the wrong solution and that can cause long term problems by selecting an option that is not best for their situation.
Credit counseling is often not understood because incorrect information is just out there and the most common one is that unlike other solutions like bankruptcy, credit counseling doesn’t have any negative impact on credit. However, the case is that credit counseling will have a negative impact on your credit and many potential creditors will know that you were on a debt management plan for up to 3 years after it has been settled because that is how long that history remains on your credit report.
Effects of Credit Counseling on Your Credit
You cannot enter into a debt management program and not be noticed by future or present creditors. Whenever you sign up, there will be a note on your credit report that shows that you are enrolled into a special program that helps you to manage debt repayments. This can make it harder for you to qualify for any new credit while you are repaying your debts under the agreement with credit counseling.
Once your debt is paid, the note doesn’t come off your report right away. It will be on there for up to 3 years, which alerts any future creditors that you have had issues paying your debts in the past. This note stays on your report similar to those who have notices of consumer proposal and bankruptcy.
However, a bankruptcy note is a lot worse than debt management programs. You are guaranteed to not qualify for loans that have low, competitive interest rates if you have had bankruptcy in the last 7 years.
Is This Effect a Bad Thing for My Credit?
Do not jump to the conclusion that your credit suffering is a bad thing, even for a little bit while paying your debt back. The fact that your credit has a note, just means that creditors are going to look into you a bit more as a potential borrower which means that they will not rush you into a loan that you may not be ready for or really afford. However, the negative credit score is not as bad when you think about how much money you are saving by going through this program instead of doing it on your own. This is really true for debt settlement. While the settlement notice stays on the credit report, you can have issues qualifying for new loans. However, the savings that you enjoy will make your low credit score worth it.
Think About Your Options
It can be hard to think about what solution is going to be right for you. Fill out our debt relief form and we will help you determine the best option for your situation.
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