topic Re: Does using a debt management program make your credit worse? in General Credit Topics

Does using a debt management program make your credit worse?

Anonymous — Fri, 13 Jun 2008 20:35:06 GMT

I was told that if you use a non for profit debt management company that it lowers your credit score. Is there any merit to this? What are the cons with using a DMP? Thanks for your help.

Re: Does using a debt management program make your credit worse?

Anonymous — Fri, 13 Jun 2008 20:45:40 GMT

Yes. Creditors look at it as one notch above all out bankruptcy.

Re: Does using a debt management program make your credit worse?

Anonymous — Fri, 13 Jun 2008 20:50:55 GMT

It may go on your credit report and potential lenders may not view it favorably on a manual review. But it does not affect your credit score.

The danger is that some unscrupulous companies will collect your money (including a fee for them) but never pay your creditors. So you can end up in worse shape than when you started.

Some people have done well with DMPs and maybe someone will chime in here. It takes years of hard work and you have to be hooked up with a reputable company.

Re: Does using a debt management program make your credit worse?

marty56 — Fri, 13 Jun 2008 22:49:06 GMT

DMP graduate, class of November 2007.

Aa far as I Know being in a DMP has saved my credit and no long term effects. Just got a car loan with SSFCU at 5.4 which is there best rate.

It really depends on what your credit looked like prior to DMP. For me it was the amount of debt that I had. No major derogs.

The result of me being in a DMP was that my FICO scores probably went up almost 200 points.

It took me almost 5 years to pay everything off and being on a strict budget. I still use the budget now.

Message Edited by marty56 on 06-13-2008 03:49 PM

Re: Does using a debt management program make your credit worse?

marty56 — Fri, 13 Jun 2008 23:08:01 GMT

Carrot1 wrote:
Yes. Creditors look at it as one notch above all out bankruptcy.

Wrong on both statements.

Those of you out there who may be considering DMP, I can only speak from my experience so please post or PM me and I will be happy to provide which company I used and anwer any question about it..

Re: Does using a debt management program make your credit worse?

Anonymous — Sat, 14 Jun 2008 01:19:29 GMT

marty56 wrote:

Carrot1 wrote:
Yes. Creditors look at it as one notch above all out bankruptcy.

Wrong on both statements.

Those of you out there who may be considering DMP, I can only speak from my experience so please post or PM me and I will be happy to provide which company I used and anwer any question about it..

Actually, some CCC look at DMP as the final step before a CH considers BK because they know that if they go into a DMP they will get some money instead if they did a BK. I worked as a collection agent (I needed a paycheck at the time) for a CCC and we would advise CH to check into DMP or consumer credit counselors if they were having money woes.

Re: Does using a debt management program make your credit worse?

fishbjc — Sat, 14 Jun 2008 03:34:27 GMT

According to Suze Orman, banks do not look at this as irresponsibility because you're making an effort to pay the debt.

Fico doesn't care and it's only important if it's a manual review, which I had and it was not an issue. Opened a line of credit for $6k. B of A sent me a letter welcoming me to the program. After speaking with their advisor....I can reopen the cc after the program is finished.

Friend finished up hers and was awarded a mtg though Chase. Chase was included in her program. They also reopened her paid off account.

Re: Does using a debt management program make your credit worse?

fishbjc — Sat, 14 Jun 2008 03:35:49 GMT

I also purchased a new beetle with 0% financing, not a problem.

Re: Does using a debt management program make your credit worse?

Anonymous — Sat, 14 Jun 2008 03:43:20 GMT

fishbjc wrote:
According to Suze Orman, banks do not look at this as irresponsibility because you're making an effort to pay the debt.

Fico doesn't care and it's only important if it's a manual review, which I had and it was not an issue. Opened a line of credit for $6k. B of A sent me a letter welcoming me to the program. After speaking with their advisor....I can reopen the cc after the program is finished.

Friend finished up hers and was awarded a mtg though Chase. Chase was included in her program. They also reopened her paid off account.

I was a finance manager at a large car dealership for a long time. Banks don't like to see it because it shows irresponsibility. You couldn't handle the debt that you racked up so you had to get help. It's like the difference between a topless dancer and a hooker. There is a very fine line. It is basically bankruptcy without court. Almost any deal I ever submitted with DMP on the file was turned down. So both statements are correct, and I've seen the effects of a DMP first hand. Thank you, please come again.

Re: Does using a debt management program make your credit worse?

Anonymous — Sat, 14 Jun 2008 03:47:16 GMT

You're also making an effort when you catch up on a loan after being 30 days late, or paying a collection. Doesn't matter. I'm sure some lenders care less than others, and some loans probably slip through the cracks. Auto manufacturers get desperate when car sales are slow and they relax their guidelines. Again, I have had a lot of deals turned down simply because the client was on a DMP. It may not lower your score, but it is a huge red flag for lenders.

Re: Does using a debt management program make your credit worse?

Anonymous — Sat, 14 Jun 2008 03:50:40 GMT

From what I've heard, it's a bit like rehabbing a student loan. While you're IN the program, your credit's worth about how far a toddler could throw you soaking wet.

But once you're OUT and have "graduated," your credit's better than ever and the DMP is a plus rather than a neg.

That's what I've been told, at least. And I've heard oodles of stories about how IF you get with a GOOD DMP, and do WELL, you'll be in far better shape than you were before you needed to enroll. If you do badly, you're sunk even deeper into a morass that will take YEARS to dig out of.

I was told this, BTW, by a mortgage broker several years back and a LO at our bank (we considered it, but didn't meet the qualifications -- really, we were looking for a "quick" way to fix our credit).

As always, I think YMMV.

Re: Does using a debt management program make your credit worse?

marty56 — Sat, 14 Jun 2008 10:46:36 GMT

What I know to be true about DMP is that most CCCs add a TL the account is being managed through one. Also most CCCs close the account after it is PIF and it showas up as account closed by grantor. Most CCCs will lower interest rates and the standard now seems to be around 10%.

National City gave me a mortgage early on DMP at a rate of 7.25 which was more to do with my low scores caused by very high CCC util and 2 recent 30 day lates caused by my transition into the DMP paying the CCC rather then me.

Last November National City gave my a Visa card with 0% BT for 15 months, 10k CL and and 13% rate which was they best I ever had.

SSFCU just gave me an autoloan for 28k at 5.4 60 months which is their best posted rate.

While I was in DMP, Sams gave me a 300 CL Sams card which now is at 3100 CL after 4 years.

I was also UD'd by AE when I entered the DMP.

You dont have to add all your CC to the program and I would try to keep the oldest account out of it. I did that with my Cheveron card. For some reason I didnt add it but I dont remeber why. It probably was out of good luck I suppose.

I do not know if any of the companies I had products in DMP with will give me a CC or not. My reason for posting the detailed info about credit I got while I was in DMP and after was to show that there is life after DMP and while some companies might reject someone because of it, others will grant them new credit at rates reflective of how they are manging their credit now.

Re: Does using a debt management program make your credit worse?

marty56 — Sat, 14 Jun 2008 10:52:44 GMT

I dont know about know but DMP porgrams dont allow secured debt or student loans to be added to it. Also for some reason they didnt add my MBNA LOC to the program. It is also possible that a CCC will kick you out of DMP. BofA did that to me for awhile and I would out with a 120 day late on my CR. They reason was for getting the Sams card while in DMP. This brings up the issue about being in a DMP and not getting new credit while in it. I dont think they cared about the mortgage though. My guess was they wanted me to get a house so that one day they could buy the mortage and take that awy from me too. Seriously BofA was the only company who cared about new credit but I would caution poeple who are in DMP or going to be not to open a new CCC anyway.