Why does Debt Management Hurt your Credit

[EaglesFan2006]

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). 

[granny031350]

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. 

[marty56]

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.

[jstap01]

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

[marty56]

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.

[fishbjc]

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.

[fishbjc]

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.

[granny031350]

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. 

[EaglesFan2006]

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?

[Anonymous]

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.