Credit Debt Consolidation-debt Consolidation + Poor Credit
People often wonder how debt consolidation + poor credit would impact your credit score in your credit report. Here are 4 things that a debt management program can impact on the credit score.
- No reporting standard: There’s no rule of thumb as to how creditors report your enrollment on the debt management plan. Depending upon who the creditors are, they may report “credit counseling account” for such accounts being paid through a debt management plan. One of the credit counselors who spends most of her time helping debt management plan enrollees interpret their credit reports, mentioned that only some 10-15% of creditors make this notation. Consumer should contact their creditors if, the creditors did not change a delinquent status despite your being current and making timely payments on the credit debt consolidation program.
- Debt management plan assists you take actions to improve your credit score: The credit debt consolidation program, in itself, does not negatively or positively impact your credit score. Debt consolidation and the debt management program will help you take actions that will help you improve your credit score and hence your credit history, such as bringing delinquent accounts current, making on-time payments, clearing your debt balances, and avoiding bankruptcy.
- Debt management plan does not expunge negative items: The act of joining the debt management plan does not change your negative records to positive in your credit history. For example, an account that went to collectors will be reported as such, regardless of whether you join the credit debt consolidation program, and will remain on the credit report for up to seven years.
- View of lenders: While future lenders may qualify you as a person who had difficulty paying your unsecured debt, they may look at credit counseling as a conscientious step in the right direction for paying off that debt. Now it’s up to them to decide whether they want to give you a loan or not.
