Choosing a debt management program

Question for the expert

Dear Credit Wise,
Would you suggest seeking help from a credit counseling agency listed by a major credit card company or seeking help from a company that I have read how they have helped people from a story in Yahoo's money section? And will that help to repair your FICO score by entering a credit counseling program? -- Michael

Answer for the expert

Dear Michael,
When seeking help from a credit counseling organization, several things should be considered when deciding who you would like to assist you. First, you will want to work with an organization that is nonprofit. The reason is because these organizations have the mission to not only assist consumers with their financial problems, but to also provide financial education that will help prevent future problems.

Second, you will want to search for an organization that is a member of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. These organizations require best practices from their nonprofit credit counseling agency members that protect consumers and assure the best assistance available.

Third, choose an agency that provides services that are convenient for you. Most organizations provide counseling services by phone, Internet or face to face. Many have hours that would allow you to seek counseling after work hours.

A referral to a particular agency from a creditor or news article would be a place to start your search. Just be sure the organization meets the criteria outlined above and is a good fit for you.

Entering a debt management program through a credit counseling agency will help you pay off your debt in a three- to five-year period.

It is difficult to know if your credit score will improve as a result. If you have late payments weighing down your credit report, and then you enter a DMP, some creditors will "re-age" your accounts and change their status from late to current. That change improves your score. However, if your accounts have already been charged off by the original creditor, re-aging may not be a possibility and your accounts would remain as negative items on your credit report.

Be wise with your credit.

See related: 6 tips for finding the right debt management plan


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Updated: 01-20-2018