A simple Google search for Debt Management Plans (DMPs) comes up with 353,000,000 results. Depending on what you read, the information might or might not be accurate. This can create confusion and uncertainty for anyone trying to find solutions to unmanageable credit card debt.
In a previous blog, I gave six reasons why a DMP could be a good solution for you. Here, I’ll address some common questions and concerns I’ve encountered from people considering a DMP.
“Will my credit score go down if I have a DMP?”
Making payments on time and lowering your balance faster through a DMP will raise your credit score. If an account is closed, your available credit could decrease to $0.00, depending on the other accounts you have. Having $0.00 in credit can lower your score. However, most people on a DMP will see their credit score go higher than it was before they started the plan, assuming they make their payments on time.
Creditors could put a note in your credit report that says something like, “Debt being paid through a credit counseling agency.” This does not impact your score.
“Why not go with debt settlement instead?”
Debt settlement plans will try to get you to sign an agreement on a debt amount for less than you owe. Agreeing to pay off only a portion of what you owe sounds promising, but it will create problems for you later. You must pay a settlement company directly, and they hold on to your money until you have enough to settle the debt. In the meantime, your creditors aren’t receiving payments. Settlement companies typically charge high fees, too.
“My creditor will close my account once I start a DMP.”
True. However, since you continue to owe the creditor, you won’t likely get another card or loan anyway from that agency while you are on a DMP. Plus, the whole point of the DMP is to get out of debt, not add to it. It’s not a good idea to take steps that put you right back where you started.
“How do I know if I’m working with reputable staff from a reputable agency?”
All LSS financial counselors are certified by the National Foundation for Credit Counseling (NFCC), founded in 1951 and the nation’s largest nonprofit financial counseling organization. This certification means that our counselors must pass an exam to test their financial knowledge and their ability to work effectively with credit counseling consumers. Counselors also must keep their knowledge current through continuing education classes and be recertified every two years.
LSS Financial Counseling has years of experience with Debt Management Plans; we started in 1987. Our service is certified by the Council on Accreditation (COA). This independent, third-party organization requires us to meet standards for high quality, professional service that focuses on the needs of people we serve.
Want to begin your journey to become debt-free? Get started online with your no-cost, confidential financial counseling session, or call us at 888.577.2227 to schedule an appointment over the phone or in person. We will support you as you take back control of your finances.
Author Cesar Romero is a Certified Financial Counselor with LSS Financial Counseling.