Todd Christensen Profile Picture
Staff Writer at Debt Reduction Services

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)

  1. sandra degarlais

    On your new website I can’t figure out how to look at my account.

    • Rick Munster

      Hi Sandra,

      The site is still coming online as we speak. Please check back within a few hours and the link should be live. In the meantime you can access your account at


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6213 N. Cloverdale Rd. Suite 100 Boise, ID 83713

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