How will a debt management program affect my credit?
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Debt Management is often viewed by creditors as a positive, an effort on your part to repay your debts and can actually improve a damaged credit rating. In fact most creditors will re-age your account after you have made 3 consecutive payments, so will no longer be reported late, possibly improving your overall credit rating. While enrolled in a Debt Management Program, creditors may report that the account is included in a managed payment plan. This has led to some misinformation that, somehow, this can impact a credit score negatively. The following explanation is directly from the FICO website. “Using a credit counseling service and having this situation reported in your credit report should not have any negative impact to your FICO® score.” The rest of the FICO explanation can be found at myfico.com on their Support Center website. FICO is the company that created and maintains the formula for determining credit scores.
If your credit report already reflects any late or missed payments, then the debt management plan (DMP) will likely improve your record by facilitating consistent, on-time monthly payments. Also, if you were late in the past, many creditors will report you as “current” as long as you make all of your monthly DMP payments on time.
If you are having trouble paying your bills, most likely you credit report already includes late or missing payments. Participating in a debt management plan could improve your credit rating if you are able to make consistent on-time payments. If you have been late in the past, most creditors will report you as “current” as long as you make your payments on time. If you have kept up on the payments on your debts, sending reduced payments under a debt management plan or getting interest concessions might affect your credit rating. Lenders may decide to not issue you new credit while you are participating in a debt management plan.