Debt Management Solutions
Does a Debt Management Program show up on your credit like a bankruptcy?
I am referring to companies like InCharge Debt Solutions (http://www.incharge.org/)
When they contact your credit card company they enroll your account into a DMP status and the accounts get closed. I am just curious what effects this has on your credit assuming that you had good credit and have not missed payments etc but are looking to lower the interest rates and pay the cards off.
Thank you E-Rock. I was told by a debt settlement company that DPMs are looked at by loaners the same as if it was a bankruptcy.
Thank you for clearing this up, and as far as the first person who replied, I specifically said DPM not a settlement, did you even read my question?
The other answer is for a debt settlement program. A DMP or Debt Management Program is a structured repayment to your creditors, where the creditor grants certain concessions, for the commitment from you to:
1. Not use your card for additional charges (the card will be closed by the lender)
2. Make a consistent and fixed payment each month until the balance is paid off (nor settled).
With a DMP you pay back everything you owe and some interest (depending on what the APR is lowered to while participating in the DMP.
The impact to your credit is twofold. Because the cards you consolidate into a DMP are closed – that can have a negative impact (at least initially). Also, the credit card companies may report that you are participating in a program with a third party DMP or CCCS program. This impacts how lenders may view your creditworthiness but is not factored into the algorithm used to calculate your actual credit score.
The good news is that the notation on your credit is only there while you are participating in a DMP. Once a DMP is completed the remark is removed from your credit report, so that for any future lender it would appear that you paid off a large amount of credit card debt in a short period, without any evidence of assistance.
Assuming that you make wise choices with the rest of your credit obligations (Auto loan, mortgage, utilities, medical bills, student loans, etc). Your credit should improve by the time you have completed the program. Your Debt to Income Ratio will be better and you will have 48-60 months (depending on the length of the DMP) of paying on time. Together the Payment History and The Debt To Income ratio – constitute over 60% of your credit score.
But to answer more directly. No, a DMP is not in anyway the same as a Bankruptcy. With Bankruptcy you are trying to walk away from your debts. With DMPs you are paying back everything is a structured manner. Make sure you are looking at Debt Management and Not Debt Settlement/Negotation… these are very different services.
Hope that helps.