How Credit Counseling Affects Your Credit Score In general, credit counseling is meant to help borrowers manage their credits better and gradually repair their tarnished credit score. It naturally follows, then, that credit counseling should have an entirely positive effect on one’s credit score. On the other hand, lenders are somehow reluctant to deal with participants in credit counseling programs, which may make it difficult for the latter to get financing. Now you may also compare a credit counseling program to an alcohol rehabilitation program. The participants in the former are strongly advised to refrain from drawing other loans while they are in the program. It is just like the participants in the latter who are not allowed to take any alcoholic beverages during the course of the treatment. Read below to weigh the pros and cons of being in a credit counseling program and consider the side effects that credit counseling might have on your credit score. Believe it or not, credit counseling was started by the first credit card companies in a bid to cut down the losses incurred by bad debtors. On their part, it is credit counselors’ business to contact their founding fathers, i.e. the creditors, and ask them to save the bacon of this or that sinful borrower by pardoning some of his or her balance and mercifully lowering the interest rate on some of his/her credits. Credit counseling may be the light at the end of your debts tunnel but, just like alcohol rehab programs, credit counseling programs are difficult to complete. Latest statistical data shows that sixty percent of those who sign up for a credit counseling program tend to drop out before its completion. On the other hand, many of the credit counselors' staunch followers soon realize that they are leading a paycheck-to-paycheck life which, it may be presumed, is something quite uncomfortable for people used to lavish spending and reckless shopping sprees. The good thing about this compulsive belt tightening is that over the four years of the program, the participants are very likely to change their spending habits. Keep in mind, however, that signing up for a credit counseling program does not automatically mean that your bills will get lower. Added the cost of the program, you may actually find yourself paying higher bills or, in the best of cases, they might go down by as little as ten or twenty dollars. Another thing that no credit counseling ad will tell you is that very few creditors will agree to become partners in such a program. Actually, some credit card companies may punish you with higher interest rates as soon as they realize you have signed up for a credit counseling program. Filing for bankruptcy is one alternative to credit counseling. In general, if you have a large number of dependents, your debt is considerable (and your non-dischargeable debt is substantial), are old, and have small retirement savings or cash reserves, you might consider filing for bankruptcy. In a similar manner, if your debt stresses you so that you can't parent, work, or sleep, it may be better to consider this option. It is up to you to decide whether it is better to sign up for a credit counseling program or simply file a bankruptcy.