Bad credit can happen to the best of people, and while you may be aware of all the usual causes for a bad credit score, there's one you might not know about, and it's leading some mortgage lenders to step up and say beware.
When monthly payments start to stack up, you may be tempted to get a credit counseling service to sort things out. They often promise to take over all your accounts, stop phone calls from creditors, and reduce your debt altogether. But tempting as it may sound, financial advisors say it may not be good news for your credit report. Not only can that kind of take-over lower your credit score, most mortgage lenders consider it the same as Chapter 13 Bankruptcy.
So if you're looking to finance a home, having a credit counselor's stamp all over your credit report can be a red flag. Often, it will disqualify you for loans, and many lenders won't consider lending you money until two years after you've been with a credit counselor or consolidator.
Barry Bray, Vice President and Chief Credit Officer for Citizen's First Bank, says not all credit counseling services are a bad thing, but look for those that will educate you on how to take care of your own finances if at all possible, and beware of signing on with someone who can take over your accounts and possibly damage your credit.