FICO Score affected by Debt Management plan

Anonymous · ‎03-31-2016

I joined a debt management plan after a divorce that left me with all the credit card debt. I had hoped it would help my credit score, but my FICO is lower than ever - the debt management company (Consumer Credit Counseling Service of San Francisco) failed to negotiate an agreement with one of my creditors and I didn't realize it until the creditor showed 3 months past due. It took another 6 weeks to get CCCSF to respond - and I finally paid off the creditor but the past due still shows on my report. Is there anything I can do to remove this? Also, belonging to a debt management program appears to not be helping my credit score at all - would I be better off filing bankruptcy (started wtih $27,000 in credit card debt - currently at $22,000)? My FICO is less than 600 - the lowest it has ever been. It looks like no matter how much I pay down the cards, the maximum is the balance I owe possibly because of the debt management and closed accounts. Looking for advice as I want to bring my FICO back up. Thank you

Appleman · ‎03-31-2016

Hello, I know it feels very overwhelming right now but hang in there and evaluate all of your options. And welcome to the board!

In 1990, I walked into a CCCS office as I had run out of credit and could not find any more. I was young and had certainly painted myself into a corner. Your circumstances are certainly different but if I remember correctly I was around the same level in debt (just shy of $30K).

It took me three years on the program but at the end my credit was decent again. I even had a letter that would allow me to get a $500 credit card at a participating bank. They actually approved me for $750 as my credit had turned around by the end of the program.

A few questions to help everyone help you:

How long have you been in the CCCS program?

You have actually paid down 18.6% of your $27,000.

Are the payments manageble currently?

Do you have a budget? Besides making regular payments to have a positive payment history from this point over you need to not generate new debt.

I know there are many who have been through bankruptcy on these boards. I have not and I am not an attorney so I have no idea if that is a good idea. I am sure others will be able to comment.

If you can stick it out with CCCS you will not have a bankruptcy on your files. I believe that would follow you a lot longer than working the system and having your scores improve.

In the end it will be your decision and I send you positive thoughts. The best of luck in taking care of your current situation. I think you will come out a much stronger person on the other end of this obstacle.

Anonymous · ‎03-31-2016

Thank you for the feedback. I have been on the program for 6 months and the payments are affordable. I have a budget though I have had a number of incidental expenses that have blown my budget - attorneys for the divorce, rental property repairs needed, and a major car repair expense. After the divorce was final in November (I had to support him for better than 14 months while we were separated), I was finally able to sell his car (and eliminate that payment + insurance) and stop paying attorneys so budget is finally under control. I am not accruing any debt. My motto has been "simplify".

I have a positive payment history on every creditor - and have had for decades. The only late payment showing on my credit report is the one creditor that CCCSF failed to finalize the agreement with. So even though I was paying CCCSF every month (since September), and CCCSF was making payments on my behalf, without the agreement the creditor considered these less than the minimum payment and therefore charged late fees and reported to the credit bureau that I was 120 days past due (the balance was actually increasing!). I received a tax refund this month and used some of that refund to pay off the creditor in hopes that it will help my credit score. That remains to be seen.

It is very important for me to improve my FICO ASAP as I just accepted a new job and relocated and am finding my credit score is affecting my ability to find suitable housing. :-(

Thanks again for the words of encouragement. This has definitely been a hard road...

mattmyFIC0 · ‎04-01-2016

Someone please correct me if I am wrong but I would think the fact that the credit counseling makes you close your accounts makes it so you have several closed accounts with balances and no available credit, which hurts your score. Also, the late payments just make it worse, especially if they are 60+ days late.

Scores 01/04/2017: EQ 719, TU 750, EX 716
Goal scores: 740 across the board

Anonymous · ‎04-01-2016

@Anonymous wrote:
I joined a debt management plan after a divorce that left me with all the credit card debt. I had hoped it would help my credit score, but my FICO is lower than ever - the debt management company (Consumer Credit Counseling Service of San Francisco) failed to negotiate an agreement with one of my creditors and I didn't realize it until the creditor showed 3 months past due. It took another 6 weeks to get CCCSF to respond - and I finally paid off the creditor but the past due still shows on my report. Is there anything I can do to remove this? Also, belonging to a debt management program appears to not be helping my credit score at all - would I be better off filing bankruptcy (started wtih $27,000 in credit card debt - currently at $22,000)? My FICO is less than 600 - the lowest it has ever been. It looks like no matter how much I pay down the cards, the maximum is the balance I owe possibly because of the debt management and closed accounts. Looking for advice as I want to bring my FICO back up. Thank you

The whole idea of Debt Management plans is not to "save your FICO score", its to prevent you from being forced into Bankruptcy. Forget about your FICO until you have finished the plan. Once you have exited the plan, then you can start rebuilding.

Anonymous · ‎04-01-2016

@Anonymous wrote:
Thank you for the feedback. I have been on the program for 6 months and the payments are affordable. I have a budget though I have had a number of incidental expenses that have blown my budget - attorneys for the divorce, rental property repairs needed, and a major car repair expense. After the divorce was final in November (I had to support him for better than 14 months while we were separated), I was finally able to sell his car (and eliminate that payment + insurance) and stop paying attorneys so budget is finally under control. I am not accruing any debt. My motto has been "simplify".

I have a positive payment history on every creditor - and have had for decades. The only late payment showing on my credit report is the one creditor that CCCSF failed to finalize the agreement with. So even though I was paying CCCSF every month (since September), and CCCSF was making payments on my behalf, without the agreement the creditor considered these less than the minimum payment and therefore charged late fees and reported to the credit bureau that I was 120 days past due (the balance was actually increasing!). I received a tax refund this month and used some of that refund to pay off the creditor in hopes that it will help my credit score. That remains to be seen.

It is very important for me to improve my FICO ASAP as I just accepted a new job and relocated and am finding my credit score is affecting my ability to find suitable housing. :-(

Thanks again for the words of encouragement. This has definitely been a hard road...

BTDT. Lower scores definitely make it difficult, but its not impossible. Before applying anywhere, explain your situation to the management - often lower scoring applicants will merely need to put up a larger deposit.

If the only negative are those late payments from one creditor, you should see some score improvement as you move forward.

Appleman · ‎04-02-2016

If I remember, they basically did close the credit lines to me and the CR said something like 'repayment plan'.

Glad to hear you are doing everthing to improve your situation and that the budget has stabilized.