• Joining a debt counseling service does not necessarily have a negative effect on your credit report. However, in order to make your debt more manageable, your credit counselor may implement certain techniques which could affect your credit report negatively. It's important to know the consequences before signing up for a debt counseling service.
  
  

Missed Payments

• Your debt counselor might advise you to miss payments in order to get a credit card company to accept a settlement, or less than what you actually owe. Credit card companies do not negotiate or accept settlement offers unless you're at least 90 days behind on your payments. Accepting such advice will likely affect your credit report, as it will lower your credit score and you will have a negative payment history.
  
  

Debt Settlements

• A debt settlement occurs when a debtor, normally credit card companies, accept less than the balance on your account. Debt services, or credit services, normally negotiate with your debtors. You make monthly payments to the debt agency. The payments are placed in an account. Once you have enough in your account to pay a creditor, your credit counselor sends in the settlement amount. This has a negative effect on your payment history on your credit report. In addition, when a debtor reports a debt as settled, the forgiven amount also appears on your credit report. Future creditors will see that you did not pay your debt in full, which could cause them to view you as high risk.
  
  

New Credit

• While some creditors might view joining a debt-counseling service as a responsible decision, others might decide that you cannot handle additional debt. However, many creditors look at your credit score when determining your credit worthiness. In such cases, your participation in a debt-management plan may not affect their decision to grant you credit.