Will financial counseling hurt your credit scores?
Meeting with a credit counselor does not have any impact on your credit scores. Your NFCC-certified credit counselor cannot add or remove any information on your credit reports, however, they can offer personalized advice on how to improve your credit. If your counselor pulls your credit reports, this soft pull will not impact your credit scores at all. If you enroll in a debt management plan (DMP), your credit scores will be indirectly impacted. Many clients experience an initial decline in points on a DMP, followed by an average increase of 100+ points gained over their first three years on the plan.
What’s on my credit reports?
Your credit reports are a record of your debt-related activities over the past seven to 10 years. Any information your creditors and debt collectors have reported to the credit bureaus will appear in your reports. This includes:
- Identifying information. Your Social Security number, current and past names and addresses, and date of birth.
- Employers. The names of employers you listed on past loan applications.
- Debt activities. Details of your current and closed credit cards and loans, collection accounts, bankruptcies, and a record of when your payments were made on time or missed.
- Inquiries. Hard inquiries show up when creditors pull your reports to approve or deny your application for a new account. Soft inquiries show up when creditors and insurance agencies pull your reports without impacting your credit scores.
What to expect when you schedule a credit report review session?
During a credit report review session, your NFCC-certified credit counselor will provide you with a step-by-step overview of what’s in your credit reports. After completing an appointment, you can expect to have:
- A clear understanding of how to read your credit reports
- Answers to your questions about credit reports and scores
- Action steps for clearing up any credit report errors
- Personalized advice on how to improve your scores
How are my credit scores calculated?
A credit score is a numeric representation of the information in your credit reports. According to FICO, the company that invented credit scores, your credit scores are based on five categories of information in your reports:
- 35% Payment history
- 30% Amounts owed
- 15% Length of credit history
- 10% Credit mix
- 10% new credit