Stop Keeping Score

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How will my credit be affected if I use a debt consolidation service?

Stop Keeping Score

Worried about your credit score if you use a debt consolidation service? Once your creditors agree to work with your debt counselor your credit cards and accounts that are part of the repayment plan will be closed. The accounts are closed to prevent you from running the balances back up again. The way the FICO scoring system is designed, if you close an account your credit score may decrease. The reason you may see a decrease in your FICO score is because the average length of credit your accounts in your credit history has significantly decreased. Keep in mind, length of credit history is 15% of your FICO score. So your score may decrease initially when you begin your repayment program.

Your main concern is paying down your debt. As you pay down your debt, your balances will decreases. Furthermore, the longer you continue to demonstrate the ability to pay on time, your credit score will increase over time. There may be other factors that may affect your credit score. Its is important to discuss this and other potential issues you may be concerned about before entering any type of agreement with your credit counseling service. These programs are designed to help you, not hurt you. If you get an uncomfortable feeling after your first meeting, it may be in your best interest to keep looking for other debt counselors.



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Christina Chan