Debt Management Program Pros and Cons - Will a Debt Management Program Hurt Your Credit Score?

If you are struggling with your credit, you might have already thought about taking on a debt management program.
It is a solution which is developed to reduce the amount of your debt and your monthly payments on your bad credit.
As your budget will look healthier, you will be able to ensure you can meet your commitments.
But as a good credit score is essential to get credit, get a better job, many consumers are worried about going down the debt management route.
You can read the pros and cons of taking on a debt management program, in case you are sitting on the fence.
Pros:

• You are able to manage your debt much better, and reduce your monthly payments.
  
• You will be able to stop collection agencies calling you and demanding money.
  
• You will have the peace of mind that you can afford your monthly payments, and you can budget better each month.
  
• You can stop default notes issued against your name.
  
• All your debt repayments will be included in your monthly installments, that way you only have to keep an eye on one payment date.
  
• Your interest can be frozen for a fixed term, and charges can be stopped.
  
• Legal proceedings against you will be stopped, and a debt management plan is usually able to stop creditors filing for bankruptcy.
  

Cons:

• You will have to make a long term commitment, usually for about five years.
  For that period of time it is almost impossible to obtain new credit at a reasonable interest rate.
  
• The agreement will be submitted to Credit Bureaus, and your credit rating will be reduced.
  
• You will have limited flexibility, and a debt management plan is legally binding.
  That means you will have to stick with the repayments and deadlines.
  If you fail to play bu the rules, your plan can be canceled and you might need to pay back the whole amount you owe.
  

How a debt management program affects your credit score A debt management plan is going to be submitted to the Credit Bureau as a note on your credit file.
It usually remains there for six years.
Therefore your credit score is likely to get affected.
If you think you can still obtain new credit while the debt management program is in place, you will be disappointed.
It will be extremely hard.
In the long run, if you are making the payments on time, and are clearing your credit in full, the repayments are going to help you achieve a better credit rating.
But late payments on a debt management plan are going to hurt your credit score more.