For those with considerable debt problems, a financial counseling session is an effective first step toward learning to manage your finances better. It can also help you determine if entering into a debt management plan (DMP) is appropriate.Start Now
Debt management plans are a means of getting you back on the road to a financially stable, debt-free life.
NFCC Certified Financial Counselors help set up a voluntary agreement between you and your creditors. Each month, you deposit an agreed upon amount with your credit counseling agency, who sends those funds directly to your creditors. By participating in this type of debt management program, you may benefit from reduced or waived finance charges or fees, and experience fewer collection calls.
When you work with an NFCC agency on a debt management program, your accounts are credited with 100 percent of the amount you send in. When you have completed your payments, which typically takes 36–60 months, the fact that you did repay your debt in full, and according to the plan, may help you reestablish credit.
Participating in a debt management program won’t have any negative effect on your credit score. Though there will be a note in your credit report that says you’re enrolled in a debt management plan, it’s not something FICO uses when determining a credit score.
In fact, certain aspects of a debt management plan have a positive impact on your credit score. Your timely payment history, which accounts for 35% of a FICO credit score, will positively impact the score as will the decline in the amount you owe, which makes up 30% of the score.
Because you are involved in a debt management plan, there won’t be any inquiries for new credit, which is 10% of the score. Opening a lot of new accounts in a short period of time has a negative effect on your score.
In the end, participating in a debt management plan will be a positive factor in terms of your credit.
Not all debt relief options are the same, especially when it comes to debt management plans and debt settlement offers.
In a few short years, I’ll be debt free and able to breathe again.