Paying Off Credit Cards With A Debt Management Program–How Consumers Are Avoiding Damage To Their Credit Score

Paying off credit card debts through a debt management program may be part of the progression that some consumers must face when they are met with excessive amounts of credit card debts, high interest rates, and the financial difficulties that may lead to either missed payments or trouble in their financial life. A debt management program is usually the option that a consumer takes after they have sought out credit counseling assistance, as there are some consumers who may be able to avoid damage to their credit score if a simple credit counseling is unhelpful and debt management is necessary.

Usually, consumers will find that a debt management program will offer them the ability to repay the entirety of their debts, particularly when financial troubles have arisen, without doing a substantial amount of harm to their credit, which is usually the case when debt settlement is necessary. Consumers are usually prompted to either contact their credit card lenders first, before missed payments occur or a cardholder’s financial situation become so dire that there are little alternatives for a solution, but credit counseling can also be beneficial as a reputable counseling agencies may find methods that consumers can use to bring about debt relief in terms of their credit card obligations.

Yet, if a debt management program is necessary for a consumer this does not necessarily lead to a negative impact in the life of the consumer, as oftentimes, a debt management program when implemented by a reputable credit counseling agency will not damage a consumer’s credit score. In fact, Bankrate.com adviser Steve Bucci states, “Accounts that are incorporated into a DMP may include a descriptive notation on your credit report that reflects that action. The fact the account is part of a DMP is not calculated in your FICO credit score. So the sole fact that the account is part of a DMP does not damage your score.”

While some consumers who enter into a debt management program may have to close out certain accounts, particularly if these accounts may come from credit cards, as certain lenders who may be willing to work with a consumer might require that an account be terminated so that they can offer affordable repayment options. If a consumer is seeking out a debt management plan specifically for credit card debt, and a credit card account or accounts must be closed, this can reduce a consumer’s credit score due to the fact that they will have a higher amount of debt compared to their overall availability of credit.

However, many advisers argued that when a consumer’s situation has become problematic to the point where they may begin missing payments or even default on credit card debts, the setbacks that may be seen from a debt management plan will obviously be more beneficial than if the consumer misses payments. Lenders who may discover that a consumer has participated in a debt management plan are typically more likely to view this in a favorable light than if a consumer had simply stopped paying or defaulted on credit card obligations. While debt management programs can bring about debt relief to the point where a consumer will not miss payments, these management programs should not be a consumer’s first priority as, again, a simple consultation with a credit counselor may provide the assistance the consumer needs to dig their way out of debt and budget in a way where future financial problems are less likely.