Does Debt Counselling Hurt Your Credit Score?
Debt review has been described as the solution that doesn’t have a negative effect on your overall credit record. However, what many consumers don’t know or that isn’t highlight in debt-related information, is that debt counseling can indeed have a negative effect on your credit score.
After debt review, you will have to repair your affected credit score. Reading this, you’ve probably already developed a negative idea about what debt counseling is and how it affects your overall financial records negatively.
Nevertheless, you can restore your credit score after receiving and completing debt counseling.
When under debt review, you are not allowed to take on new credit of means. However, if you’ve been presented with a situation where you must take on new credit, it could reflect negatively on your credit record.
However, when under debt review, the best advice to any consumer, would be to stay as far away from credit as possible.
By simply sticking to debt review terms, you can settle your debt easily. Once you have completed your debt review, you will be issued a credit clearance certificate by the National Credit Act (NCA), which will help you get your credit score back on track.
After receiving your clearance certificate, you must also ensure that your name has been removed from being under debt review by the National Credit Regulator.
What Happens When You’ve Finished Your Debt Review and You’ve Received Your Clearance Certificate?
Once you’ve received your clearance certificate, you can start working on improving your credit score, which firstly, means that you must avoid taking on new credit at all cost.
By clearing all lines of debt and managing your non-debt expenses monthly, including your insurance premiums, cell phone contracts, TV subscriptions or any other monthly expenses, you can improve your credit score.
Upon doing this and maintaining a clean financial record without skipping payments, it won’t be long before you can apply for small amounts of credit once more.
Your payment history generally remains on your credit profile for two years after a debt review. This is due to the reduced payments that have been made during the period that you were under debt review, which doesn’t reflect in a positive light on your credit profile and will have significantly reduced your score.
After six months of adequate credit behavior, your credit score will slowly but surely start to rise again.