Debt management program and credit score
How does enrolling into a debt management program affect credit score? It basically does not. For every account enrolled with a credit counseling agency, your credit report will have a comment stating that it is paid through a debt management program. Such statements will remain until these accounts are paid in full. You credit score will no be affected in any way.
That said, you must monitor every account enrolled into a debt management program like a hawk. Many things can go wrong as people grow complacent once they signed up with a credit counseling agency, wrongly thinking that such an agency monitors their actual credit reports. Nothing can be further from the truth - all a debt management plan does is negotiates lower interest rates with the creditors and sets up a payment plan. You are still ultimately responsible for timely payments, very much so. Following are the facts you should know.
1. Participating in a debt management program does not affect credit scores by itself.
2. It does make almost impossible for you to qualify for additional credit and some debt management programs prohibit from applying for new credit outright.
3. While a debt management program lowers interest rates, your monthly payment will very likely go up because the longest you can be in the program is 5 years, with most limited at 2 or 3 years.
4. Many creditors withdraw from debt management programs once they find out that you are looking for new credit. You must then pick up the payments, so monitor creditors participation very carefully on your own. Do not rely on credit counseling / debt management company.
5. Make sure that account which is declared as paid in full by the plan, is indeed paid in full. There has been cases when a few dollars left on enrolled accounts resulted in new late payments and badly affected credit score.
That's pretty much it. Before enrolling in some debt management program, often for a fee, and worrying how it will affect the credit scores, see what you can do on your own. Could be the best choice.
Sun Oct 31, 2010 12:10PM | Copyright: www.bad-credit-advisor.com | More in Credit Repair Tips | Comments (0)
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