Debt Management Programs And Influences On A Credit Score–How Is Debt Management Beneficial For Troubled Consumers?

Debt management programs can be useful in the lives of consumers as this form of debt repayment assistance will usually give a consumer the type of personal financial aid that will be necessary for them to avoid missing payments on various debt obligations and find some form relief. However, debt management is not typically the primary step that a consumer takes when they are having financial difficulties, yet it can be helpful if a particular individual’s financial situation has reached a specific level. There are still some concerns by consumers as to how debt management will influence their credit score, due to the fact that some may not have seen problems arise in the area of their credit score and history, so they would, obviously, like to avoid any drops in their score.

Yet, there are many financial advisors that often point out that a drop in a consumer’s credit score does not necessarily follow a debt management program, if certain precautions are taken. There are some who feel that simply because a consumer’s credit history may show they entered into a debt management plan, this might not negatively affect their financial life, but there are some counselors who feel that it could make qualifying for new credit difficult.

Simply put, consumers who are currently enrolled in a debt management plan, which is typically implemented through a credit counseling agency, will likely have a comment on their credit history stating that their accounts are being paid through this type of repayment plan, but often times, this note will disappear after a consumer has completed their debt management program. In many cases, consumers may want to avoid attempting to open a new line of credit while they are in this particular program, as creating debt, like with the use of credit cards, is obviously counterproductive to erasing debt in the lives of consumers.

However, there can be some negative aspects of a debt management program that could cause a consumer to see a drop in their credit score, if they do not choose a proper credit counseling agency that will implement their debt management program. An article on Bankrate.com states, If the agency administering the program misses or is late with a payment, it’s your credit record that gets marred.” For this reason, consumers must properly research their credit counseling agency and any debt management programs that they may consider to be helpful for their situation through either resources like the Better Business Bureau or by running a Google search, as a fraudulent debt management company or simply a credit counseling agency that is poorly run can cause setbacks in the life of a consumer due to either miss payments or by charging excessive fees.

While many consumers are often counseled to seek out credit counseling first rather than turning to debt management, or worse, debt settlement, individuals who are having trouble in their financial life need to address these problems early so as to give themselves the best chance to avoid difficulties like missed payments and, if counseling or debt management is needed, consumers will have the time to find the proper agency for their particular situation and, hopefully, find the debt relief they need in a timely manner.