Debt Management Programs and Credit Scores
Financial Myth: Don’t Debt Management Programs Hurt my Credit Score?
When entering our debt management program (DMP), keep repeating to yourself…”I am here to get out of debt.” Nothing worthwhile is ever very easy, including a DMP. For one, our program requires you to close all credit accounts that are on the program. This may even briefly lower the debt balance-to-credit limit ratio portion of your credit score. However, by sticking with the program until your debt is completely paid off, this short drop can pale in comparison to the potential credit score increase debt-free clients see at the end of the program.
One common question is, “I heard its better to file bankruptcy. Is that true?” While bankruptcy may be a valid option for some, it is generally accepted that declaring bankruptcy is the single most damaging event in your credit history. A bankruptcy stays on your credit report for ten years, lowering your credit score. DMPs are designed to last five years or less. Actual participation in the program itself has no affect on your FICO credit score.
Within 30-60 days of entering a Debt Management Program, a notation is generally added to your credit report by your creditors. That notation exists so that while you are in a DMP, no new unsecured credit lines should be issued, such as credit cards or signature loans. This notation is generally removed by the creditors upon completion of the DMP.
Despite the growing number of studies that show that individuals in Debt Management Programs are more likely to eliminate their debt than those in the control groups that do not seek such counseling, there are still a few lenders that misunderstand the credit report notation.
If you’re considering a car or home loan, please call us first to review your budget and analyze your current financial situation. Then, if you run across a lender that will not work with you for a secured loan (home or car) because of the credit notation, let us know. We know there are many lenders that work well with our clients.
If you have any suggestions or stories on how you’ve experienced relief from credit cards and other debt feel free to share in the comment section below. Tips, tricks and other suggestions are always welcome!
1-877-OUT-DEBT (688-3328)
Low Credit Scores Growing Among Consumers – CBS News Segment featuring Todd Christensen
I want to share the story and video that aired last week on KBOI CBS TV. Todd Christensen, Debt Reduction Services Director of Education, shared some excellent thoughts on the current decline in overall consumer credit scores.
Click to view ‘Low Credit Scores Growing’ segment
Here is the text version article which can also be found on www.KBOI2.com.
Credit Report and Your Rights
Have You Pulled Your Credit Report Lately?
Information found on credit reports and that three-digit number called a credit score havebecome such integral decision-factors in our lives. Do you feel as though you are now judged upon your credit report and credit score more than ever?
We have the opportunity—and the right—to see our credit reports and ensure that they are accurate, which is especially important before you apply for a loan. Here are some steps to taking advantage of the FACT Act to monitor your own credit: Continue reading “Credit Report and Your Rights” »
How to Dispute Discrepancies on Your Credit Report
The odds of there being error on your credit report are pretty good. Errors do occur frequently, but they can also be fixed. Here is the recommended way to dispute errors with the Consumer Reporting Agency. Continue reading “How to Dispute Discrepancies on Your Credit Report” »
Importance of Credit Scores
Have You Checked Your Credit Report Lately?
The word credit can be heard every day from the TV, ads in the paper, and even the radio.
What is credit? It is the ability to borrow based on the promise of repayment. Lately, everything seems to be based on a person’s credit score. Here are a few ways credit scores affect the price you pay for the following items:
- Personal Life insurance: Having a bad credit score can drop you to the lower tiers causing you to pay a higher premium, though your health is still the most influential factor. Continue reading “Importance of Credit Scores” »
Credit Cards, Debt, Interest and Money
Here are some interesting figures I had put together a few years back. Interesting figures to say the least. I thought I would repost them.
Did you know…?
- The average APR for standard and gold credit cards is over 13% according to bankrate.com.
- The average APR for all credit card holders is nearly 17%.
- If you’re one day late on any payment to any creditor, you could be subject to a default rate as high as 29.99% on your credit card accounts. (bankrate.com) Continue reading “Credit Cards, Debt, Interest and Money” »
Filing Bankruptcy – Credit After Bankruptcy
So I’ve filed for bankruptcy, now what?
I’ve heard from several people who have filed for bankruptcy protection that once they have successfully filed the last thing they want to do is deal with their finances. I recommend that a person places their finances near the top of their priority list once a bankruptcy has been filed. Continue reading “Filing Bankruptcy – Credit After Bankruptcy” »
Top 10 Tips to Strengthening Your Credit Score
The Guiding Principle behind each of the following tips is to manage and use your credit wisely: pay your debts according to the terms you have signed and avoid excessive debt. Read through the following tips for ideas on how you can personally increase your credit score and better your overall credit standing.
Tip #10: Check your credit report at least annually for mistakes and inaccuracies. Go to www.AnnualCreditReport.com to print and download your free report for each of the three national credit reporting agencies. If you want your credit score as well, you will be required to pay for it. Checking your own credit report in this way will not harm your credit. Continue reading “Top 10 Tips to Strengthening Your Credit Score” »