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Credit Counseling and FICO Score

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Anonymous
Not applicable

Credit Counseling and FICO Score

Hello,

 

I recently met with CCCS to set up a debt management plan.  I have been doing pretty well paying off debt on my own but my interest rates are high and I thought this would be a good time to bring in help to get me the rest of the way and also free up some monthly income.

 

But before I sign up I want to make sure I understand if or how this could impact my score.  I've seen articles that indicate it will impact my score (if the creditor reports it as "not paid as agreed") and articles that say it will not impact my score at all (FICO doesn't want consumers penalized for joining a plan).

 

So I thought I would go to the source to ask the question:  how will signing up with a debt management plan (presuming I pay on time) impact my credit score?

 

Many thanks,

Artsy

 

Message 1 of 10
9 REPLIES 9
Jazzzy
Valued Contributor

Re: Credit Counseling and FICO Score

Hi...you may want to use the search feature and search the forums in order to read other peoples' experiences.

 

From my understanding, it has indeed negatively impacted scores and reporting for some people.

Message 2 of 10
marty56
Super Contributor

Re: Credit Counseling and FICO Score


@LynetteM wrote:

From my understanding, it has indeed negatively impacted scores and reporting for some people.


There is no long term affect on your FICO score from being in a DMP.  In the short term, I dont know if there was an affect on my score when I started the program since I was not FICO aware until I was close to finishing the program and anyway it is a mute point since you wont be applying for any credit while in a DMP.

 

By the time you finish the program, not having any CC debt will give you much higher score then when you started and even if you had lates prior to DMP, by the time your are finished (5 years), they will be 5 years older thus not hurting as much (if any). 

 

The TL statment saying the account was being managed by a CCCS as zero impact on your FICO score and as far as my own experieince goes, hasn't stoped me from getting credit at the best rates.

 

The trick in being in a DMP is that you must be able to afford the payments and never apply for new credit while in the program.  if you have a BofA product in the program, that goes double.

1/25/2021: FICO 850 EQ 848 TU 847 EX
Message 3 of 10
marty56
Super Contributor

Re: Credit Counseling and FICO Score


@Anonymous wrote:

But before I sign up I want to make sure I understand if or how this could impact my score.  I've seen articles that indicate it will impact my score (if the creditor reports it as "not paid as agreed") and articles that say it will not impact my score at all (FICO doesn't want consumers penalized for joining a plan).


As long as you are in a CCCS - Debt Managment Plan and not a Debt Settlement Plan, they cannot report you as not paying as agreed since the DMP company negotiates a payment that will have the account PIF in 5 years which obviously is paying much more than the minimum payment you were paying before.  You pay the full principle off plus in most cases some interest.

 

If they are a debt settlement company, they will reduce the principle you owe and it will destory your credit and possibly rip you off in the process.

1/25/2021: FICO 850 EQ 848 TU 847 EX
Message 4 of 10
Anonymous
Not applicable

Re: Credit Counseling and FICO Score

I was told today by a mortgage loan officer that me being in a DMP was negatively affecting my score. I came on here to see what others said about this topic. He didn't say that I wasn't able to qualify because I was in a DMP, just that it was bringing down my score. Not sure I believe him though.

 

Any thoughts?

Message 5 of 10
marty56
Super Contributor

Re: Credit Counseling and FICO Score

I do not know how my scores were effected while I was in DMP but the biggest effect on my score back then was CC util.  IMHO I didnt think DMP had any effect on my score but I was able to get a mortgage while in the program.  worst case you could refi once you complete the program since as you pay down the debt, your scores will go up and depending on your negative information, 5 years of DMP will add 5 years to any derog which might also help as well.

 

Be carefull if you have any BofA products in DMP since they kicked me out of the program when I got a sams card which lead to a major derog which I have to wait 3 more years for it to go away.

1/25/2021: FICO 850 EQ 848 TU 847 EX
Message 6 of 10
demi
Established Contributor

Re: Credit Counseling and FICO Score

I was still in a DMP when I bought my house last year.  No problem.  However, it was in the last year or so of the DMP.  Personally, I think a note on a credit report that you are in a DMP shows you are actively working on your credit...but I am not the FICO score goddess......yet.

Starting Score: EQ 679, TU 697
Current Score: EQ 680, TU 672
Goal Score: EQ 720, TU 720


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Message 7 of 10
AndySoCal
Valued Contributor

Re: Credit Counseling and FICO Score

Here is a link to an article on the subject

 

http://www.bankrate.com/finance/debt/debt-management-plans-affect-your-credit.aspx

 

 

Make sure you understand what the DMP agency is going to do to help you. Sometimes what they do can hurt your score. IE settling account

 

 

 

 

FICO Scores XPN v8 802 V2 831 (SDFCU) TUC 803 v8 EFX 807 (10/2023)
Discover 09/90 19,000, JCPenney 10/2008 4,700 US Bank Cash+ 12,000 Citibank Custom Cash 5/2015 11,100 C State Dept. FCU 15,000 06/2023 , 02/2024 Redstone FCU Signature VISA 10,000 Banking: Ally Bank Credit Unions: Lafayette FCU Quorum FCU State Department FCU State Department FCU Pelican State CU Redstone FCU

Message 8 of 10
marty56
Super Contributor

Re: Credit Counseling and FICO Score

Great article.  I wish I followed

 

"They need to look at their statements," says Carol Wagner, a certified credit counselor with Consumer Credit Counseling Service of the East Bay. "They need to be vigilant."

 

More carefuly.  I have 3 more years to pay for that mistake.

1/25/2021: FICO 850 EQ 848 TU 847 EX
Message 9 of 10
llecs
Moderator Emeritus
Moved:

Re: Credit Counseling and FICO Score

Split your post to form a new thread within Understanding FICO Scoring

Message 10 of 10
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