How Debt Counselling Affects Your Credit Score

Oftentimes, people borrow more money than they can afford to pay back. This leaves them open to financial trouble. Through debt counseling, individuals can make their debts more manageable. However, this begs the question – does debt counseling affect credit score?

Does debt counselling affect credit score?

Being under debt counselling does not have any negative impact on your credit score. While you are under debt review, credit bureaus cannot add any additional negative information onto your credit profile due to you being under the protection of the National Credit Act.

Now that we know that debt counseling doesn’t have any negative effect on your credit score, let’s take a look at how you can improve your credit score.

How to improve your credit score with debt counselling

Although Credit Bureaus will mark you as “under debt review” and you will be unable to access any additional credit, starting the debt review process is the first step to repairing your credit score.

Once the debt review process has come to a close and you have received your certificate, you will have grounds and financial knowledge to rebuild your credit score.  Here’s how you can improve your credit score from this point on.

Stay on Track

Sans debt, you have the opportunity to achieve a healthier credit score. To prevent yourself from falling into the same cycle of debt again, you need to strive to incrementally rebuild your credit score.

To do this, start small (but only if it falls within your budget) – monthly cellphone bills, insurance, etc.

When you’re applying for a credit card, remember to set a very moderate spending limit that you can easily pay back. When it comes to things like rebuilding your credit score, consistency is key.

Here are some tips to help you stay on track once you have successfully completed the debt review process.

• Open a savings account and aim to deposit at least 10% of your monthly income each month
• Create a daily and monthly budget that gets updated regularly
• Use less credit; aim for no more than 30% of your credit

Pay bills on time every month

A good idea is to create a monthly bill payment calendar that includes all of your monthly expenses. Write down what payment is due and on what date. This will help you stay on top of what needs to be paid by what date.

Once you’ve created a calendar, you want to make sure that you pay all of your bills on time every month. If you end up missing a payment, you need to call your creditors and let them know.

Make at least the minimum payment

When you’re going about making your payments every month, it is important that you make the minimum payment at the very least. Pro tip – strive to pay back more than the minimum payment.