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Does Debt Management Affect Your Credit?

The truth is that when creditors report "credit counseling" or "DMP" on a consumers credit report, IT DOES NOT PERMANENTLY DAMAGE THEIR CREDIT! In fact the entry does not even drop their score. It is put there to prevent them from getting additional REVOLVING credit while in the program.... THIS IS A GOOD THING!

What very few consumers know is that being in a credit counseling program CAN ACTUALLY ENHANCE THE CLIENTS ABILITY TO GET MORE CREDIT! When a client has been with us for a year or longer we can actually get them approved for mortgages and 2nd mortgages. We do it every week for our clients that have been with us for a significant period.... What everyone needs to understand is that credit counseling by design is for PRESERVING CREDIT not destroying it.

What people have to realize is that when they find themselves in this position in many cases they have both a credit problem and a spending problem. The only way they can get over it is to take action and ABSTAIN from the use of revolving credit. Committing to a debt management repayment plan is a commitment that requires some discipline and perseverance. [Creditors] SHOULD stop them from obtaining more credit cards. All of the major creditors are in agreement that clients of debt management programs should be able to keep one or two accounts out of the program for business and travel, so nobody is saying that they should be cut off from the convenience or necessity of credit cards entirely.

The credit counseling entry on the report can be avoided in some cases by following our instructions for properly closing the accounts prior to beginning the debt management program. Some creditors like Discover, Providian and Household will report each and every time a client goes into debt management whether they close the accounts first or not. Citibank in most cases will not report if the account is closed first. Sometimes they do but usually when they receive a proposal from us they go into the system to close the account and if they see it is already closed by the consumer they will not enter anything on the report. This could change in the future but it really doesn't matter when you really understand what the "Credit Counseling" entry is all about." We take steps to ensure that clients that need one or two credit cards either leave one or two out of the DMP or get another credit card before we submit proposals to their creditors.


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