@thelethargicage wrote:You're confusing DMP with "Debt Settlement". Debt Settlement will destroy your score. I almost did it once, but I'm glad I didn't. They'll take your payments every month, but not pay your creditors to force them to "settle" for pennies on the dollar. The problem, your creditors will send you 1099 for the amount you're supposedly "saving". Of course, the debt settlement "company" never mentions that. They just tell you to use your debit card, banks are scumbag, etc. And who knows what they do with your money while they're holding it, waiting for the creditors to "settle".
DMP, on the other hand, if done by a reputable company, will not only save your credit but quite a bit of money on interest. They negotiatie a lower interest rate with each of your creditors as well as getting late fees waived, which allows you to pay your debts sometime in this lifetime. One of the conditions is that your accounts will be closed. They do charge you a monthly fee for disbursing your payments, but it's still a much better alternative than "settling".
As far as your credit report/score goes, some issuers while place a "Account on financial counseling program" notation on your CR, which will get you automatic denials with many issuers (Barclaycard and Amex, IME, although US Bank didn't seem to mind strangely enough). So technically you can apply for more credit, but YMMV, not to mention you don't know how any of the creditors you're still paying off will react, because they keep SPing you the whole time.
Once the card is paid off, the "financial couseling" notation will be removed from your CR usually within 60 days (Citi does it right away, BofA will take longer, Chase doesn't even use it--they just mark your account as "Closed by Grantor", Capital One actually has a whole department dedicated to this. Very nice people, by the way. Yes, I really mean that).
Long story short, DMP good, "settling" bad.
Thanks for the clarification.
Why is debt settlement bad for your score? What happens to your credit when you're working with a debt settlement company?
@HiLine wrote:
@thelethargicage wrote:You're confusing DMP with "Debt Settlement". Debt Settlement will destroy your score. I almost did it once, but I'm glad I didn't. They'll take your payments every month, but not pay your creditors to force them to "settle" for pennies on the dollar. The problem, your creditors will send you 1099 for the amount you're supposedly "saving". Of course, the debt settlement "company" never mentions that. They just tell you to use your debit card, banks are scumbag, etc. And who knows what they do with your money while they're holding it, waiting for the creditors to "settle".
DMP, on the other hand, if done by a reputable company, will not only save your credit but quite a bit of money on interest. They negotiatie a lower interest rate with each of your creditors as well as getting late fees waived, which allows you to pay your debts sometime in this lifetime. One of the conditions is that your accounts will be closed. They do charge you a monthly fee for disbursing your payments, but it's still a much better alternative than "settling".
As far as your credit report/score goes, some issuers while place a "Account on financial counseling program" notation on your CR, which will get you automatic denials with many issuers (Barclaycard and Amex, IME, although US Bank didn't seem to mind strangely enough). So technically you can apply for more credit, but YMMV, not to mention you don't know how any of the creditors you're still paying off will react, because they keep SPing you the whole time.
Once the card is paid off, the "financial couseling" notation will be removed from your CR usually within 60 days (Citi does it right away, BofA will take longer, Chase doesn't even use it--they just mark your account as "Closed by Grantor", Capital One actually has a whole department dedicated to this. Very nice people, by the way. Yes, I really mean that).
Long story short, DMP good, "settling" bad.
Thanks for the clarification.
Why is debt settlement bad for your score? What happens to your credit when you're working with a debt settlement company?
debt management negotiates interest from 30% to 5%(example) but you still make a monthly payment and the company pays all of your creditoes in full
debt settlement negotiates eith your creditors to pay 10%,20% 30% if the dollar balance owed to the creditor. Big difference.
Current Score: EX 712 4/28/15, TU 713 4/14/14 lender pull, EQ 723 9/16/15, 740 EQ bankcard 8 6/1/15 lender pull