The consumer's guide to credit counseling

First USA, the credit-card giant, reports its customers as delinquent on their bills until they make three consecutive payments of the new minimums negotiated by their credit services, said spokesman David Webster. Citibank, by contrast, simply adds a note to the credit bureaus' files that the customer is enrolled in credit counseling.

Being reported as late or delinquent can certainly hurt your credit score, the three-digit number widely used by lenders to determine creditworthiness. A simple notation about credit counseling probably won't. The credit score formula used by most lenders, known as FICO, now ignores any reference to credit counseling that may be in your file, said Craig Watts, spokesman for FICO creator Fair Isaac & Co.

Even some lenders that were traditionally suspicious of credit counseling have loosened their stance. More mortgage lenders are willing to lend to people who have successfully completed repayment plans, said mortgage broker Allen Bond, president of the California Association of Mortgage Brokers' Southern California chapter.

Some lenders say they even view credit counseling as an encouraging sign that a customer is getting his or her debts under control. Citibank, the largest issuer of credit cards, says people who have fallen behind on their payments often improve their status in the company's eyes by enrolling in -- and sticking with -- a debt repayment plan.

"We always viewed that as a positive," said Citibank spokeswoman Maria Mendler. "We've seen that for people who enter these programs, there's a significantly lower rate of default."

That said, there are still some lenders who refuse to deal with anyone who has enrolled in credit counseling. And if you fell behind on your payments before you entered credit counseling, you'll find those late payments will still affect your credit score even after you've paid off your debts.

As you can see, there are no easy answers for people who get in trouble with credit. Once you're there, make sure to evaluate your options carefully, and don't make a bad situation worse.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

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