Shedding debt outweighs a damaged credit score

To break the debt cycle, stop charging, get a budget and counseling

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

Ask a question.
Question for the expert

Dear Credit Guy,
I have four major credit cards. I am struggling to pay off the balances. I have racked up $13,000. Is there a way to cancel a few of my cards and get assistance paying them off? I have great credit and don't want canceling my cards to disrupt my credit too much. How much would getting help affect my credit?  -- Jason

Answer for the expert

Dear Jason,
First of all, I'm glad you wrote. You are not alone. More people today struggle to meet their minimum payments and carry large balances. First, I have a question for you: Have you stopped adding to the balances on your credit cards? If not, you need to stop charging now. To do this, you need to bring your income and expenses in line so that you aren't using credit to make up the difference. A little common sense will go a long way. You must start living within your means and establish a realistic budget. I know this is not the answer you are looking for, but sometimes a big dose of reality is all it takes.

A credit counselor can help you work out a budget or spending plan if you are having trouble accomplishing this on your own. It's not rocket science: If you make $3,000 per month, you can't spend $5,000 per month. You can find a qualified credit counseling agency that will provide a free counseling or budgeting session by visiting the Association of Independent Consumer Credit Counseling Agencies website.

You can also get assistance paying off your credit cards from the same credit counseling agency that helps you set up a budget by enrolling in a debt management plan. Your certified counselor will review your financial situation and determine what action steps are most appropriate for you.

If it is determined that based on your income and expenses you qualify for a debt management plan, you will then be allowed to make one monthly payment toward your balances with creditors. In addition, your counselor will communicate with the creditors on your behalf to lower your interest rates and to bring any past due accounts current. Be aware, however, that creditors have become less generous in recent years in cutting such deals.

Like you, many people worry that getting help to pay off debt will affect their credit. However, if you are struggling to make the minimum payments now, any unexpected expense could cause you to miss a payment, and if that should happen, your credit would suffer much more.

If you were to get assistance with paying your debts by entering into a debt management plan, the creditor would close the credit accounts that are included in the program and a notation would be placed on your credit report that the account is part of a credit counseling program. The FICO credit scoring formula does not take into consideration the notation that the account is part of a credit counseling program; however, the account being closed is considered. Therefore, your score will likely drop a few points due to the accounts being closed.

What you should keep in mind is that paying off your balances should be your No. 1 goal. What I gather from your question is you are on the brink of being unable to make your payments on time and late payments will affect your credit score much more than closing the accounts.

As you know, a good credit score is important for more reasons than just getting credit. Namely, a poor score can negatively affect your ability to lease property, get a good rate on your insurance policies and even whether you are promoted at your place of employment.  

Take care of your credit!

See related: Creditors become less willing to negotiate with debtors, Lowered credit limits can hurt consumers' credit scores 

Meet's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday,'s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.

Updated: 10-15-2018