Credit Impact of a Debt Management Plan

No matter how you decide to handle your debt, it’s likely to have a significant impact on your credit. So what happens to your credit if you consolidate your debt with a debt management plan? There are no guarantees, but here are some things to keep in mind.

Closing old accounts hurts

The older the age of your open credit accounts, the better. When you create a debt management plan with a nonprofit credit counseling agency, the included credit card accounts will almost always be closed by your creditors. Those accounts closing could lower the overall age of your accounts and drop your score slightly. This is almost always a temporary drop, but something you may experience in the first few months of creating a debt management plan.

Paying off your debt helps

The two biggest factors in your score are almost always timely payments and total debt balance. While on a debt management plan, you’re given support and budgeting advice to ensure you’re able to make payments on time every month, while paying off your debt in full in less than five years, all of which should have a very positive impact on your score.

We've found that after two years on a DMP, our clients see their credit scores go up by an average of 62 points. The key is manageable payments that help you stay consistent and reduced interest rates that help you make accelerated progress.

Having a debt management plan noted on your report has no impact on your score

An account being paid through a debt management plan may be marked as such on your credit report by the reporting creditor. This is not a factor in any credit scoring model and won’t have an impact – positive or negative – on your score.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

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  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.