How a Debt Management Plan Can Impact Your Credit Score

Most of the people who come to MMI are facing some kind of financial challenge. They may be behind on their mortgage, overwhelmed by student loan debt, or struggling to fund their retirement. The majority, however, are trying to manage more debt than their income can support.

For consumers with unmanageable amounts of credit card debt, MMI offers free, confidential debt counseling and, when applicable, a debt repayment program called a debt management plan (DMP). 

When considering your debt repayment options, one consideration should be how that method impacts your credit score. To accurately determine how a DMP might impact your credit score, MMI reviewed multiple years worth of data. Here's what we found:


Year-over-Year Data

MMI conducted a four-year analysis of credit score data and found that clients who started and maintained a DMP with MMI improved their credit scores by 84 points from start to finish on the program.

The study tracked the annual aggregate FICO® 9 Score migration over time for MMI clients who started and maintained a DMP for four years. A total of 37,034 clients with DMPs beginning between 2016 and 2018 were included in the study.*

Year Score
Pre-DMP 591
One 633
Two 652
Three 667
Four 669

*Individual outcomes will vary, and results are not guaranteed.

How a DMP Impacts your Credit Score

A debt management plan can influence your credit score in multiple ways. Most importantly, a DMP is designed to help you do two things that are essential for building strong credit:

  • Make consistent payments
  • Reduce overall debt levels

While there are many different credit scoring models, nearly all weigh similar factors. Here are the most important factors in your FICO credit score:

Payment History: 35%

This includes the previous seven years of payments (including missed or late payments) for all credit and loan account.

Amount Owed: 30%

While this factor includes your total debt amount, the biggest factor may be your credit utilization ratio. If you use too much of your available credit, your score may suffer. 

Length of Credit History: 15%

Accounts that have been open for a long time are better for your score than new accounts.

Recent Inquiries: 10%

Recent attempts to open new credit and loan accounts may decrease your score (at least temporarily).

Credit Mix: 10%

Having a mix of credit and loan products in good standing is better for your score than only having credit cards (for example).

While your credit score may not be the most important thing in your life (especially if you're struggling), the more you can do to improve your score while getting out of debt, the better – especially if you've got big purchases on the horizon, like a car or a house.

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