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Credit Counseling and Credit Repair
Posted on February 18, 2011
Credit counseling may cross your mind as you think about strategies and techniques to help improve your credit and pay off your debt at the same time. Credit counseling agencies are one of a few types of companies that help consumers manage their debts. Can credit counseling agencies also help with credit repair?
Credit Repair vs. Credit Counseling
There’s a big difference between credit repair and credit counseling. A credit counseling agency’s primary goal is to provide some financial education to consumers who are in debt. The credit counseling agency might also work with the consumer and the credit card companies to negotiate a payment plan on the debt.
Credit repair agencies, on the other hand, work to clean up negative credit report information to help improve the consumer’s credit rating.
Can Credit Counseling Help With Credit Repair?
Credit counseling agencies don’t directly assist with credit repair. In other words, they don’t review your credit report or dispute negative information from your credit report. Legitimate credit counseling agencies don’t make claims about improving your credit score or restoring your credit history. Your credit score is not the focus of credit counseling; your debt is the focus.
Credit counseling can indirectly help improve your credit score, if you follow the rules of the credit counseling agency. What credit counseling does do is work out a payment arrangement with your creditors so that you can once again afford your minimum payment. You make a monthly payment to the credit card issuer and the issuer distributes your payments to all your creditors. You still have to make your payment to the credit counseling agency on time. Otherwise, they won’t be able to pay your creditors on time.
Remember that payment history has the most significant impact on your credit score. By making your payments on time through a credit counseling agency, you’re helping improve your credit score. You’ll also reduce your total debt, another major factor in your credit score.
Accounts That Can’t Be Included in Credit Counseling
Not all your accounts can be helped through credit counseling. If your accounts are very delinquent, you may have to catch up on your payments before you can be enrolled in credit counseling. Without paying the entire past due balance, your account will continue to fall behind even if the credit counseling agency is making a payment.
You may not be able to include collection accounts or secured accounts like a mortgage or car loan.
Will Credit Counseling Work?
People often want to remove accounts from their credit reports without ever paying the balance on the account. Which is why many of them seek credit repair companies. But, the goal of credit counseling is to actually pay off your debts in full over a period of time.
Credit counseling and credit repair have different goals, but they could both make up part of your overall goal of paying off debt and repairing your credit. For example, you might use credit counseling to help pay off your debts. At the same time, you could use credit repair techniques to remove negative information from your credit report.

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