FICO Score / utilization ratio and a Debt Management Program

[Anonymous]

Hello everyone,

I am hoping that someone specifically from FICO can help me answer a question about the "utilization ratio" how this truly affects an individual who opts to enroll on a Debt Management Program (DMP).  It is my understanding that FICO conducted a study several years ago about the default rate of individuals who were enrolled on a DMP versus those self administering their debt and concluded that enrollment on a DMP did not increase the overall default rate.  Due to this finding, the "penalty" to one's credit score for using a DMP was dropped in 1999 and now participation does not affect the overall score.  Is this true? 

Along the same lines, does enrollment on a DMP affect the "utilization ratio" thereby decreasing the credit score?  It is my understanding that the amount of debt that you owe constitutes about 30% of your credit score.  In theory, if the account is closed - which is a requirement to enrolling on a DMP - then the utilization ratio should be impacted thereby decreasing the credit score.  I am trying to understand how a DMP can affect one's credit score and if there is a correlation between the utilization ratio, the DMP and the closure of the accounts. Personally, I do not think that there is or if there is one, it is a small, negligible impact which would be offset by paying down your debt.  

Any information you can provide will be greatly appreciated.  Thank you in advance for your time. 

REWALLER

[marty56]

Welcome to the forum.  I graduated DMP last November.  There is no FICO score hit for being in a DMP.  Most TL's will show the the account was closed by the grantor and the account was managed by a CCCS but since DMP I was able to get a prime Visa card and the best rates for an autoloan that my CU offered.

I do not know if my score was affected while I was in DMP in terms of util or the fact the accounts were closed but since all my cards were maxed out, that was the dominating factor in my score anyway.  I only started checking my FICO score the last 8 months I was in DMP.

Even if my score was affected while I was in DMP, it is not now and since you are not supposed to get credit while in DMP, your scores are a mute point.