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How Long Will a Debt Management Plan Affect Your Credit?

How long will this program be reported on my credit report? I want to get out of debt, but I don’t to do that at the expense of my credit for the next seven years.

Lacey H. in Montana

Comparing the credit impact of different debt relief options

Some types of debt relief hurt your credit, while others generally help it. There are two parts to a consumer’s credit profile – a credit report and a credit score. These two pieces can be affected significantly (and differently) depending on which solution you use to get out of debt.

SolutionCredit Report ImpactCredit Score Impact
Debt consolidationNo negative remarks when done correctlyLowers credit utilization, thus it generally improves most consumer scores
Debt management planNo negative remarks when done correctly; builds positive payment history; brings delinquent accounts currentOverall the affect is generally neutral or positive, although some consumers with high scores may see a slight drop when credit cards are closed
Debt settlementEach account settled will be noted as settled in full for seven years; missed payments will be noted in credit historyGenerally leads to significant credit score damage; expect a much lower score, unless your score is already low before you settle
BankruptcyNoted in the public records section of your report for seven years (Chapter 13) or ten years (Chapter 7)Expect your score to drop into the mid-500s if it is not already that low

As you can see, debt consolidation and debt management are the only relief options that will not generate negative credit report information. With a debt management plan, there is some potential to see a slight drop in a consumer’s credit score as they complete the program.

The reason is that accounts included in the program will be closed once they are paid off. Closing accounts reduces the number of active, open accounts you have. It can also decrease your “credit age” which is what creditors use to measure the length of time you’ve used credit.

Credit age accounts for just 15% of the “weight” in consumer credit score calculations. So, while it is a factor that can influence your score, it’s not the most significant factor. By contrast, credit history accounts for 35% of your score. So, since a debt management plan helps consumers build positive credit history, it generally has a positive effect on scores. This is particularly true for consumers who have taken some credit damage before enrolling.

Here are a few examples of clients who say their credit has improved after being enrolled in a debt management program.

Case Study

Althea H. from Washington DC

“My interest rates were too high – 16, 17, 18 percent. Consolidated Credit was able to lower my rates to a point where my payments now go toward the principal so I can finally get out of debt. My credit score is going up, too! It was around 650 before but now it’s close to 700. ”

Where she started:
  • Total unsecured debt: $18,601.00
  • Estimated interest charges: $10,654.62
  • Time to payoff: 13 years, 8 months
  • Total monthly payments: $744.04
After DMP enrollment:
  • Average negotiated interest rate: 8.50%
  • Total interest charges: $3,680.08
  • Time to payoff: 4 years, 9 months
  • Total monthly payment: $390.00
Time Saved

8 years, 11 months

Monthly Savings

$354.04

Interest Saved

$6,974.54

Case Study

Damon from Columbia, MD

“Consolidated Credit has made it possible for me to take charge of my finances. Not only are my bills getting paid, there is no hassle from my creditors. And the creditors did not put negative remarks on my credit report for consolidating my bills. ”

Where he started:
  • Total unsecured debt: $13,332.00
  • Estimated interest charges: $7,746.20
  • Time to payoff: 13 years, 6 months
  • Total monthly payments: $533.28
After DMP enrollment:
  • Average negotiated interest rate: 7.20%
  • Total interest charges: $2,453.91
  • Time to payoff: 4 years, 9 months
  • Total monthly payment: $281.00
Time Saved

8 years, 9 months

Monthly Savings

$252.28

Interest Saved

$5,292.29

Case Study

Paul from Keyport, NJ

“Five stars! The program did exactly what the counselor promised and I couldn’t be happier. Consolidated Credit helped me save my credit and a lot of money in finance charges. ”

Where he started:
  • Total unsecured debt: $31,311.00
  • Estimated interest charges: $18,407.19
  • Time to payoff: 15 years, 7 months
  • Total monthly payments: $1,252.44
After DMP enrollment:
  • Average negotiated interest rate: 6.97%
  • Total interest charges: $6,075.25
  • Time to payoff: 4 years, 10 months
  • Total monthly payment: $652.00
Time Saved

10 years, 9 months

Monthly Savings

$600.44

Interest Saved

$12,331.94

Case Study

Patricia from Virginia Beach, VA

“It feels so good to have someone here to help me get my credit and my life back on track. ”

Where she started:
  • Total unsecured debt: $14,931.00
  • Estimated interest charges: $8,062.30
  • Time to payoff: 10 years, 6 months
  • Total monthly payments: $596.52
After DMP enrollment:
  • Average negotiated interest rate: 4.79%
  • Total interest charges: $1,990.03
  • Time to payoff: 4 years, 7 months
  • Total monthly payment: $309.00
Time Saved

5 years, 11 months

Monthly Savings

$287.52

Interest Saved

$6,072.27

Ready to see if a debt management plan can help you? Talk to a certified credit counselor for a free debt analysis.