Will Credit Counseling Improve Your Credit Rating

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Mandatory Credit Counseling Before Bankruptcy
In a study released in October, 2006 by the National Foundation for Credit Counseling (NFCC) on the eve of the one year anniversary of the 2005 Bankruptcy Reform legislation, there were a number of unanticipated results of the now mandatory pre-bankruptcy credit counseling.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires all debtors to get mandatory credit c... Read credit counseling article



Mandatory Credit Counseling Before Bankruptcy
In a study released in October, 2006 by the National Foundation for Credit Counseling (NFCC) on the eve of the one year anniversary of the 2005 Bankruptcy Reform legislation, there were a number of unanticipated results of the now mandatory pre-bankruptcy credit counseling.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires all debtors to get mandatory credit c... Read credit counseling article



Will Credit Counseling Improve Your Credit Rating
Are you overburdened with debts, and would are considering credit counseling? The counseling company would most probably advise you to combine your debts and repay them over an extended time period. Why not wait a moment, and weigh the pros and cons before entering any commitment like this?

Often people prefer to consolidate their dues and pay them off, over declaring bankruptcy. They fear that bankruptcy would make their credit ratings bad for quite a few years, but repaying their debts would make a good impression on their creditors.

However, at the end of several years, they find that they are living in an impoverished state, no matter whether they are employed with a steady state of income or not. As for example, they are unable to pay for insurance, for the higher education of their children, to invest in property or real estate. This is often the case especially with people in the lower or medium income group, because the bulk of the income is spent in repaying the debts. Savings is nil. What is worst is that the repayment period is still not over, and looms ahead of them yet more years of living in this hard-up way.

Even when the debts are fully repaid, they have no asset. For that reason they will not be offered new credits. They are still not solvent, their financial problems are not solved.

The alternative is bankruptcy. The debtor is discharged from all his/her debts after their assets are distributed evenly among their creditors, even if the outstanding amounts have not been settled in full. This may in fact allow one to improve their credit rating sooner. Bankruptcy remains in the credit report for seven years. But in a few years time, a good credit may be recreated.

A person who has declared bankruptcy is allowed to retain all their income, save it and use it to accumulate new assets.

Thus it is advisable to bear in mind that if one fails to reimburse their debts within a few years after starting a consolidated debt repayment, it is better to declare bankruptcy. It is mandatory to receive credit counseling before filing for bankruptcy. But one should properly investigate the credentials of the counseling agent, and not enter into any repayment program without evaluating whether they will be more affluent than their present condition after all debts are paid.

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Credit Rating Services

A credit rating is a formal appraisal of an individual, corporation, autonomous governments, conglomerates, administrative and financial organizations, or even a country, evaluated on the basis of past financial transactions and present assets and liabilities. From a credit rating a credit granter or a financier can evaluate the ability of a borrower to repay a loan.

In the United States., for a personal credit rating, a credit agency studies the financial statistics of an individual and allots an individual a 3-digit number called the FICO credit score. Such agencies are called credit bureaus -- companies that assemble and keep a record of the credit history of an individual. In U.K., these bureaus are referred to as the credit reference agencies. Generally they charge a fee for allocating a credit score. If the information they furnish in the credit report is found to be false and detrimental for an individual, they can be litigated for slander.

The principal credit bureaus in the United States are Experian, Equifax, and TransUnion, while Experian, Equifax, and Callcredit are the principal credit reference agencies in the United Kingdom. According to Canadian Imperial Bank of Commerce, the major credit bureaus for individuals are Equifax, TransUnion and Northern Credit Bureaus in Canada. The leading global credit rating agencies are Moody's, Standard and Poor's and Fitch Ratings.

Managing a good credit score is important, especially when you are planning to take a loan or to buy a big automobile, or real estate, or renting an apartment, or even making arrangements for a vacation. Investors consider a low credit rating as the sign of a high risk of non-payment of a debt. Thus they tend to charge exorbitant interest rates.Moreover credit ratings are nowadays used to adjust insurance premiums, to ascertain the amount of a utility or leasing deposit, and even to corroborate an individual's eligibility for employment.




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Will Credit Counseling Improve Your Credit Rating
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