The Center For Debt Management
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Effect of a Debt Management
Program on Your Credit Report

Debtors who are contemplating enrolling in a Debt Management Program are often concerned about the effect their action will have on their credit report. Let's get right to the point. Should you elect to enroll in such a program you should expect your credit report to take a hit, especially during the initial stages.

For those with an already tarnished credit history, this should be of little concern as the effect will be inconsequential considering the consumers's existing report. For those with good credit, it must be realized that if they are indeed a candidate for a debt management program, chances are it's just a matter of time before their credit report begins to deteriorate anyway.

Enrolled in the Debt Management Program, during the first three months or so, accounts may run late and are typically reported as being past due. This is simply a result of the process and often cannot be avoided. Luckily, most accounts are re-aged after making three consecutive payments through the debt management agency and as a result, thereafter will be reported as being current. Therefore, as long as payments are being made as scheduled while in the Debt Management Program, once an account has been re-aged, a good payment history will be established, eventually resulting with a favorable credit report.

Understand, however, that not all creditors will re-age accounts. This is especially true of installment loans and 30 day accounts, such as, gas cards. Thus some accounts may continue to be reported as past due and may eventually charge-off. A "Charge Off" status, which is considered very derogatory, may remain on the report until the account is finally paid off.

In addition, most creditors will report the account as being paid through "Credit Counseling" or "Under Debt Management" and as a result, many lenders will not extend credit upon seeing the notation. As each account is paid off, however, the notation may be removed. Once accounts have been paid in full, and as a result, all notations removed, assuming the client has made payments as scheduled, the report should receive a good credit score.

Final Thoughts

While your desire to maintain a good credit report is certainly prudent and admirable, if you are heavily burdened with debt your prime focus needs to be on becoming debt free. Once you are debt free, your debt-to-income ratio will be substantially reduced, and this in itself will be a large step in regaining your ability to secure a line of credit.

After you pay off an account in the Debt Management Program your credit rating will begin to improve. But, most important, once you complete the program, you will have a fresh start and be debt free!

Need to Get Out of Debt! — Call Right Now — 1800 DEBT.COM


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