topic Re: Why does Debt Management Hurt your Credit in General Credit Topics

Why does Debt Management Hurt your Credit

EaglesFan2006 — Fri, 01 Feb 2008 18:33:33 GMT

I was looking at Take Charge America and was unsure why it is damaging to my credit. I saw their price breakdown based on my montly payment and it seemed evenly distributed among my debts ( I realize they must take some fee though). But I hear how things like this will hurt my credit...what is the reason behind this? It seems my credit is already so damaged and as I posted before I'm not having any luck with dealing with CA's right now or OC's because they're all 1.5-2 years old. The two biggest bones in my back are both overdrafted bank accounts (2016 and 1846) that are in collections and I'm not sure what I can do about these. I feel like I'm out of options and I keep having a bad feeling one of these companies will sue me even though I'm actually trying at this point to work something out. So i thought maybe something ilke TCA would help. I also thought about looking in to bankruptcy, but it seems like the 6k I owe may not be eligible (those 2 accounts plus the rest is from pay day loans).

Re: Why does Debt Management Hurt your Credit

granny031350 — Fri, 01 Feb 2008 19:06:36 GMT

In the eyes of the creditors, a debt management program is a "wage earner program" and that is similar to a chapter 13 bankruptcy. When I used CCCS back in the day, it reported as "wage earner" on my credit reports. If you are really deep in debt you might want to consider all of the options open to you before you decide on a debt management program.

Re: Why does Debt Management Hurt your Credit

marty56 — Fri, 01 Feb 2008 19:08:15 GMT

I gradudated a DMP in November after being in it for 4.5 years. I took some hits on my FICO score for the closed accounts but you can easily make them back by adding new credit which I was able to do once I graduated.

I dont think you can put the overdraft and pay day loans into a DMP. They only work with unsecured CC debt. Also I dont know about CFL loans or even a LOC type loan but I suspect they dont work with those either. I used Debt Free Christian (Harbour) which advised me of which accounts they deal with.

It seems that most of your debt would not be covered by a DMP but you should check anyway since the rules may have changed.

The DMP was the right choice for me. Not so much for my credit standpoint but it forced me to change my lifestyle and how I manage my money which was what I needed to do. It may not be the right choice for everyone.

Re: Why does Debt Management Hurt your Credit

jstap01 — Fri, 01 Feb 2008 19:18:15 GMT

Be careful. By reading and learning on here, you can what a DMP would do for you for much less $$$. Good Luck.

Re: Why does Debt Management Hurt your Credit

marty56 — Fri, 01 Feb 2008 19:23:22 GMT

In the eyes of the creditors, a debt management program is a "wage earner program" and that is similar to a chapter 13 bankruptcy

Not from my experience and and the adding of a TL that says you are in aDMP has no effect on your FICO score while it is my understanding that any BK will lower your score.

I have never seen a post in this forum about soneome turned down for credit who had the required credit scores turned down for credit because they were in a DMP, Blacklisting aside.

Re: Why does Debt Management Hurt your Credit

fishbjc — Fri, 01 Feb 2008 20:04:52 GMT

According to MYFICO being in a DMP has no impact on your score, however, you may take a hit on the closed accounts. I've been gaining much ground since I've been in DMP.

I pay them about $17/monthly and so worth it. My BofA cc is now 4% interest. I also make a few extra payments here and there.

I'm very happy with my dmp.

Re: Why does Debt Management Hurt your Credit

fishbjc — Fri, 01 Feb 2008 20:06:21 GMT

P.S. According to a close friend who graduated from DMP, she's now receiving offers from the creditors she included in the program! That's a very positive sign!

Plus, we're working very hard to pay back every $ instead of bk.

Re: Why does Debt Management Hurt your Credit

granny031350 — Fri, 01 Feb 2008 20:13:06 GMT

well I apologize for having to file for BK. My debt was a lot of secured and I know for a fact that CCCS listed me as wage earner plan and I for years before I filed had to explain if I had ever filed for BK. And in a chapter 13, you do pay back your creditors.

Re: Why does Debt Management Hurt your Credit

EaglesFan2006 — Fri, 01 Feb 2008 20:25:06 GMT

Looks like some good advice. I will say that I ran through a listing of accts with Take Charge and they seemed to take both the PDL and Bank overdrafts (though all are in collections) so I'm guessing they would work with those accounts?

can someone explain to me what the difference is between my overdraft B of A that's with Penncro collections versus a B of A credit card debt that's with collections. I guess I'm asking at this point are they basicly the same thing in the eyes of reporting?

Re: Why does Debt Management Hurt your Credit

Anonymous — Fri, 01 Feb 2008 20:41:28 GMT

Accounts placed into a DMP have their own 'code' when being reported. &^^%%$%^& I can't find the pages upon pages of codes that I know I saved somewhere on this hard drive.

Re: Why does Debt Management Hurt your Credit

Anonymous — Fri, 01 Feb 2008 20:57:28 GMT

granny, do you know where the term "wage earner program" comes from? I haven't heard the term before.

Re: Why does Debt Management Hurt your Credit

sl — Sun, 03 Feb 2008 12:59:01 GMT

I was in a DMP and still have $650 to go. I had two Chase cads and AMEX in mine. AMEX is the only one that made reference to a DMP and said it was being handled by a Consumer Management Program. When I finished the program with AMEX, they deleted the trade all together and I had 4 late pays on it. I was still able to get CAP one and HSBC when that was on my CB.

Today I have two AMEX cards - Blue and Platinum. Blue has a CL of $6K and Platinum is no preset spending limit.

In my eyes, it enhanced my life in many ways, got control of my credit and got decent cards now.

When I started back in 2004 by Fico averaged 535 they are now all in the 700's.

Re: Why does Debt Management Hurt your Credit

marty56 — Sun, 03 Feb 2008 15:00:03 GMT

sl wrote:
In my eyes, it enhanced my life in many ways, got control of my credit and got decent cards now.

Same for me, The DMP also forced me to use a budget which I am still using. It is great to finally get control of ones credit.

Re: Why does Debt Management Hurt your Credit

Anonymous — Sun, 03 Feb 2008 17:47:58 GMT

I have to chime in here too. Before I went into the DMP, I was over $50K in debt. I paid and paid and paid on these accounts, but because of the interest rates, late fees and over-limit fees, I was having to pay, the balance barely budged in four years. Finally, we couldn't take it anymore and went to see CCCS (I would recommend to anyone considering this). Now, 28 months later, our debt is down to $22K because the interest rates have been lowered on most - eliminated on some. We will be debt free in about 18 months. If we hadn't gone into the program, we would probably still owe about $50K and probably have to file for BK. Has it had any effect on our CRs? I don't believe it has because we are paying through a DMP. Maybe because some of our accounts have been closed. There are comments from creditors that we are paying through a credit counseling program, but they delete after being paid off. Going into a DMP forces you to live on a budget. I consider it a new lease on life. My scores are now TU - 621, EQ - 644, EX - 592.

I know I am going to be writing a lot of GW letters, but considering what I have been through, I'm surprised my scores are as high as they are. I'm going to be putting together a GW letter today because Sears MC never showed our account current and continues to show the account 30 days late, every month. I believe this is why EX is 592. I was stupid for not pulling my report before now (1/31/08). I now have hope.

Good luck on what you decide to do, but I don't believe my DMP hurt my credit - it was already hurt. I don't have any 'wage earner plan' comments on my CRs. The comments placed in my files about being paid through a DMP didn't come from CCCS, but through the CCC's themselves. Good luck!!!

Message Edited by OneDayOneDay on 02-03-2008 09:47 AM

Re: Why does Debt Management Hurt your Credit

fused — Sun, 03 Feb 2008 18:03:26 GMT

As far as FICO scoring is concerned, being in a DMP has no ill affect on scores. If the DM companies pays anything late then, yes, this will hurt your scores.