Debt Management And Credit Scores
Posted on July 17, 2009 at 12:43 am
I am interesting in applying for a debt management program. I am $10000 in debt due to some complications in my pregnancy, and I hope to have that paid little by little as I'm starting work. I do have a concern with regard to debt management and credit scores--does enrolling in this payment scheme have an effect on my credit? I know my credit's bad enough because I fell behind on all my bills and I plan to rectify the situation as soon as I get back on my feet. Thanks and have a nice day
Posted on July 17, 2009 at 3:10 am
Your accounts' enrollment on a DMP will not have a direct effect on your credit report. Your creditor will report the account's participation in a DMP to the credit bureau, but it won't really produce any drastic ups or downs on your credit score.
Posted on July 17, 2009 at 3:52 am
You mean they'll just be putting a little note there saying that i'm on DMP? Well as far as i'm making payments i should still be doing okay with the program, right? And no bad credit records or anything.
Posted on July 17, 2009 at 4:40 am
You may have difficulty in appling for new or additional credit once you're on a DMP. Some lenders may find that a consumer utilizing a DMP may prove to be detrimental for future business, and decide that the customer has all the debt that they can handle. On the other side of the coin, other lenders may see that in a positive light, given that the customer made ways for the debt to be taken care of.
Posted on July 20, 2009 at 8:43 am
You are right- in terms of debt management and credit scores there is no direct effect. In regards to what caffeinatrix mentioned- the reason is that lenders perceive credit counseling along the same lines as a Chapter 13 bankruptcy. Why? The repayment terms of both a DMP and a Chapter 13 are nearly identical.
Posted on August 18, 2009 at 6:18 am
Worrying about credit scores while in debt management or managing one's debt, seem like an unnecessary burden to put on one's already stressed out self. I think that the consumer should focus his/her energy on making sure that he/she pays on time (reduce debt, eliminate it) and then think about credit repair later.
Posted on August 18, 2009 at 9:14 pm
Allow me to veer away from the "debt management and credit scores" discussion to explain my take on the matter...
Given your current debt amount, horizontally vertical, I suggest that you settle your debt instead of enrolling it in a debt management program. While it may help you in terms of taking care of your interest rates and other fees that are added on top of the balance, you also may need to consider that it may take a long time before your current debt amount would be paid off. DMP's usually take as much as five years before the debts would be paid off in full and are more advisable with balances that have lower amounts.
Posted on August 19, 2009 at 2:38 am
Right, because typically consumers with lower debt amounts (at least below $10k) are more qualified, if not eligible, for the debt counseling scheme. Debt amounts of $10k or higher are more applicable for settlements. You also need to keep in mind that the accounts must be past due in order for them to be settled.
Posted on August 25, 2009 at 11:32 am
Ok so the deal with debt management and credit scores is that there is none? It sounds like it only hurts the actual report in a away? What if I want to settle a debt?
Posted on August 26, 2009 at 1:40 am
It doesn't really *hurt* the report per se. Rather it just indicates that the debt has been under a debt management program for a certain period of time.
If you want to settle a debt, your accounts should be delinquent in order for you to be able to settle them--the fact that they're already delinquent also means that your credit isn't really in good shape. Settling a debt does not have any direct effects on your credit report, as far as I am aware.
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