It’s a common myth that signing up for a debt management plan affects your credit rating drastically. It is far away from truth. The fact is debt management plans and credit rating is closely related but not as you think.
Seeking help fro a credit counseling company doesn’t mark your credit score negatively. However, it gets quite difficult for you to get credit in future. While you are on a plan, a comment is inserted in your credit report mentioning that you are using some debt management company to get rid of your debts. However, as soon as the amount is paid, the comment will be erased. Generally, credit counseling information is not considered when people check your score. Why should they? You are paying your bill, aren’t you? However, the comment might affect it a bit.
Although your debt management plans and credit rating are closely related, it won’t affect you much unless you miss a payment. By doing this, your score as well as your reputation is spoiled. Hence, it’s quite important to choose a credit counseling agency wisely. If you miss a payment and if the late fee is high, it might further affect your score. Signing up for a debt management plan means getting lower interest rates, reduced repayment plans, no overdraft and late fees, no call from creditors, or no letters. Hence, because they provide so many benefits, they charge a certain fee.
However, a debt management will not always provide you the best offer. You can ask the creditor directly for a settlement. They may or may not agree on a lower amount. But you never know until you ask.
The two important things you need to think about are debt management plan and credit rating. If you cannot afford the amount suggested by the debt management company, you can disclose your situation to the debt counselor. They may be able to get you out of the mess. However, you must not stop checking your statements. This is the only way to know whether or not the agency is repaying the amount on time. |
