It will take a number of months paying as agreed. When you don’t pay what is owed they will drop you from a I1 t a I5. If you don’t pay at all it is an I9. This is a charge off collection. All of these statuses drop your score. When the debts are satisfied the score will also start coming back as long as there are no more adverse reports. Buying a house now will cost you more in interest due to your score. I would sugest waiting until your score get to be at least a 620 to save yourself some money.

The purpose of going on the credit counseling plan is to get out of debt…not to get into debt. Thus, while you’re still on the program, it is designed so that you won’t have easy access to more loans (of any type).

I understand your desire to buy a house, but in this market that may be a risky proposition. This isn’t a bad time to be a renter. Focus on paying down your debt for now. In a few years, you’ll be debt-free, and you will be much better positioned to buy a house THEN. That’s the whole point of credit counseling….to get you free of debt, not to get you deeper in.

I wish I’d been able to warn you about debt consolidation/credit counselling before you went ahead and did it. Most credit counselling agencies are useless and simply negotiate for lower interest rates in a way that you could have easily done by yourself, but without all the fees attached. Most agencies send in your first few payments late, which tarnishes your credit rating and that might explain why your score plummeted a whopping 200pts. Another big reason that your score probably dropped 200pts, is if the credit counselling agency closed out all the accounts that you consolidated with them. CLOSING credit cards is bad, because it lowers your debt-to-credit limit ratio and also lowers your overall “length of open credit history.”

But here’s what to do to improve your situation:

1. Do the dirty work for the credit counselling agency. DO NOT trust them to send in your payments on time! Therefore, perhaps you should send payments to the credit counselling agency(CCA), but then send additional payments to your creditors, so in case the payment from the CCA gets to your creditors late, you’ve already made a payment so it won’t affect your payment history. Also, follow up with them frequently. If the CCA says that they can slash your card’s interest rate from 23.99% to 15%, confirm this with your credit card company. Now if you’re doing all this work, you might wonder what the purpose of paying a CCA even is! My point exactly…CCA’s are worthless.

2. Pay off your credit card balances as soon as you can. Not only will this raise your debt-to-credit limit ratio and thus your FICO score, but the sooner you pay off your balances and get out of CCA, the sooner you can stop paying monthly maintenance fees to the CCA.

3. If at all possible, DROP the CCA. The only time it is not good to do this, is if you’ve put down a hefty deposit with the CCA, and the deposit is only refundable if you’ve completed paying off your debts in their entirety through use of the CCA. But if you didn’t pay a large deposit, then I’d suggest DROPPING them and managing your accounts on your own.

4. Keep all credit accounts that are NOT consolidated with the CCA, in good standing and paid on time.

5. Get an open credit card, if your consolidated credit cards have been closed out(some CCA’s will close out your credit cards as soon as you join the program…they make it seem as if you will have your accounts reopened after you pay them off, but they’re lying! in reality, you leave the CCA with a bunch of useless closed accounts, a lower FICO score resulting from closing all those accounts, and your lowered FICO score makes it impossible to obtain new credit!). Your low credit score will make it very difficult, but not impossible. If you’re a student(even a part-timer at a technical institute), get a student credit card…these are extremely easy to get. I know a guy who had HORRIBLE credit scores in the 400s, was going through debt consolidation, but STILL got approved for a Citi student card. Or, you can go to a local credit union and get a SECURED credit card, which will require a deposit, but the deposit will be refunded to you(plus interest) after a set period of time(usually ~12 mos.). You will NEED open credit accounts to establish credit. Just make sure that the card has the Visa or MasterCard logo on it, and that it reports to the credit bureaus.

You can also get a Crown Jewelers credit card. They literally give credit to ANYONE who makes a small jewelry purchase on their online site. Buy yourself(or a loved one) a fairly cheap charm necklace, apply for the Crown Jewelers card, and then pay it off but keep the account open.

6. Also, get a loan. Although obtaining new credit can lower your credit score a bit initially and make you look desperate for credit, in the long run, consistently paying on a loan will help you to build some serious credit history. Since you have a low credit score, here’s two easy loans to get:

1) a secured loan from a credit union(works the same way as a secured credit card)

2) a Bally’s gym membership contract. Bally’s reports their contracts as an “installment loan” on your credit report, and they don’t even conduct credit checks! The only way that you can get rejected for a Bally’s membership, is if you already owe Bally’s money for a past unpaid contract, or if you don’t have a checking/savings account. They require you to have a bank account for some contracts, so that they can automatically withdrawal monthly membership payments consistently.

7. Reduce applying for any new credit, unless it is absolutely necessary to build your credit, such as applying for the Crown Jewelers account or secured loan(although most credit unions do not require pulling your credit for secured loans/credit cards, since secured loans/credit cards are backed by a deposit). Make sure that any credit you apply for, you have a good chance of getting approved for.

8. Check your credit report for any errors or inaccuracies, and dispute them! Even dispute accounts that WERE legitimately late, because if the creditor does not have the documents to prove that you really paid late, then the credit bureaus are obligated to remove any bad note regarding the lateness from your credit report! =)

If disputing lates doesn’t work and the lates are resultant from your entering CCA, then I would suggest sending each of your creditors a “goodwill letter.” Basically this is a letter that states that you are sorry that you were late, you experienced a catastrophy/financial disaster out of your control, you have learned from this bad experience, and since the bad experience you have proven to be a very responsible customer. I’d suggest waiting a few months after you exit the CCA before sending this letter. Make sure you are done with the CCA, and make sure that you have shown a good payment history for the last couple of months. The “goodwill letter” doesn’t always work, but it works sometimes…it’s worth a try!