Participate Debt Management Program

[Anonymous]

Hi Everyone,

I am very new to FICO score newsletter. I need your opinion regarding the Debt Management Program.

Please excuse me if my English grammar level is a second language.

I have a question to ask everyone who knows/knew about the Debt Management Program (DMP) or participated before or still in DMP. I am thinking of participating DMP. I want to stop Debtors bother me. I want to definitely Stop credit score pull down.

Is Debt Management Program worth? If it is a yes, tell me why?

Thank you very much for the response.

Brenda C.

[Creditaddict]

Debt management will actually lower your credit score even more most likely.

but if you are currently behind on payments or over credit line and there is no way to catch the accounts back up without help then it might be your best option. 

[Anonymous]

I'm currently signed up for in a dm program, and it does affect your report.  I had 3 accounts signed up, paid one off recently, still paying on the other 2.  It amazes me how people that have had BK get all these credit cards and high cl, when I apply, I get denied because I'm in a dm program.  At least I'm paying off my debt!  I'm beginning to think I should have just filed BK!  lol

[Creditaddict]

the reason why DMP effects you more than BK a lot of times is because banks know you can't go back and file again for at least 7 years. If your in DMP and trying to get new credit, what's to say you won't max out the new card and then just add it into the current DMP and keep going in a cycle.

If you are in a good DMP and they pay your bills on time, once you complete it, your credit should come out okay on the other end and then you could start rebuilding. 

[Anonymous]

Do yourself a favor and make sure that the DMP you're considering is a reputable one. Do your research. I was enrolled in one a few years back and they eventually ended up in cahoots with the creditors and managed to re-age the debt making it seem as though I was enrolled for 3 years longer than I actually was. If it weren't for that, I'd be debt-free as surely as I'm typing this.

[demi]

Make sure its a debt management plan and not a debt consolidation.  I graduated last fall.  I don't believe it hurt my credit other than the fact that I had to close my accounts, which you would have to do with most other options.  It worked wonders for me, I have qualified for my first house, couple of credit cards since the program.  Other than a statement on the accounts on your credit report stating "account managed by a debt program" (or something to that effect) and the closed accounts it does nothing to your report. 

Like others said, make sure its a reputable firm.  I used edited, $50 upfront fee, $35 a month...which is about one late payment.  They took the money from my account, and the bills were paid within a few days.  I had no late or missed payments.  They educate you, and believe me, having that 1100 taken out on the first made me learn to budget.  Most accounts were reduced in interest, but I paid every dime, no bills were reduced.  I felt strongly that I had gotten into the mess with mostly discretionary spending, and I needed to pay it...bankruptcy was not an option as far as I was concerned.

If I knew then what I know today, I would probably be able to handle this on my own...but I will not get in that position again !

There are others on the board who have had success with the programs who I am sure will chirp in as well.

Good luck.

DMPs cannot be mentioned by name.

Message Edited by llecs on 03-25-2009 08:10 PM

[corkyduckfan]

I was with edited , and they helped me.  They negotiated with the various credit/dept. store cards to lower the APR's.  They took money out of my checking account monthly and always made timely payments to my creditors and never screwed up the amount.  I even applied for a couple credit cards before I finished my payment plan through edited.  I was approved, much to my suprise. 

DMPs cannot be mentioned by name.

Message Edited by llecs on 03-25-2009 08:11 PM

[marty56]

When I entered my DMP programs, my scores where probably bad anyway.  You will not apply for new credit while in the program so its temporay effect on your scores are a mute point anyway.  The goes double if you have a BofA product you want to place in DMP. 

Since DMP I was able to get a prime Visa card and an autoloan at my CU at their best rates.

[yoreljm]

I'm in a DMP right now (ACCEL) and I really don't care what impact it has on my score. However, they told me that my score will not be lowered simply because I enrolled in a DMP (FICO does not include "participation in DMP" as one of the factors). However, they said there will be a notation on my account that i'm in the program, so creditor could see it and deny me credit. One could argue that you should not try to get new credit if you cannot handle your current debt anyway. Here are some things that could cause your score to fall when you join the program:

(1) You were not up-to-date on your bill before you entered the program, so as each day passes your credit score worsens.

(2) They ask you to close all your accounts. With all your accounts closed, your debt to credit ratio is 100%. 

Things that will cause you credit score to rise:

(1) They re-age the accounts

(2) They help to bring your accounts up to date. 

Things that are great regardless of impact on your score:

(1) Creditors stop calling

(2) Lower interest rates

(3) You just make one deposit and the DM company does the rest. 

[marty56]

---

@yoreljm wrote:

However, they said there will be a notation on my account that i'm in the program, so creditor could see it and deny me credit.

---

I can tell you that notation has had zero effect on my ability to get credit post DMP.

Another aspect of DMP programs that it is not a quick fix and I was forced to make a budget and stick to it which I still do today.

One other note is that you should leave your oldest and most usefull CC account out of the program.  It is possible that the CCC would AA your account but it is wort the chance.  If they do, you could always add the account to the plan.