Do Debt Management Programs Affect Your Credit?

By Jackie Beck   Updated 08/21/2021 at 9:33 am

Do debt management programs affect your credit? The short answer is yes, they can. But the longer answer is that it depends on the details.

Tell someone you’re signing up for a DMP, and they’ll probably tell you not to because it will make your credit worse. But that may or may not be true.

What happens while you’re in the program and what your credit is like now both make a difference.

Debt Management Programs Shouldn’t Lower Your Credit Score As Long As:

  • both you AND the program make your monthly payments in full and on time
  • creditors are kept up to date about any changes in income levels or other life events that could affect repayment ability
  • nothing negative is reported about your debts. (For example, your accounts might be reported as not paying as agreed.)

That last one can be kind of tricky. Sometimes creditors will report that you are not paying as agreed when you’re in the plan. (Even when they agree to accept the plan.) Presumably this is because you’re not paying as originally agreed. If that happens it can lower your credit scores.

They may also add a note to your credit reports that says you have a payment arrangement with them, or that you are in credit counseling or a DMP. And of course, the note would be completely true.

Debt Management Programs Will Hurt Your Credit Score If…

On the flip side, being in a debt management plan can lower your credit score if any of the following happens:

  • you’re now paying your creditors less than the full minimum payments
  • you can no longer make your monthly payment at all
  • for some reason the program does not pay your creditors on time or as agreed, even though you’re paying the program
  • your accounts get marked as late or not paying as agreed
  • any of your debts are charged off

So just signing up for a DMP shouldn’t impact your score, but what happens while you’re in it can hurt it. Lenders may also be less likely to lend to you if you’re in one, because it shows you need help repaying your debt.

Know What Your Credit is Like Ahead of Time

If you decide to sign up for a debt management program, it is important to know what your credit is like first. Find out if there are any negative items on your credit report and get an idea of your credit score.

Get copies of your credit reports for free at You may be able to see one of your credit scores for free through your bank. You can also check Credit Karma for an idea.

That way if people ask about them in the future you can explain exactly why something happened.

Key Takeaways

Either way, if you wonder if a debt management plan can affect your credit, the answer is yes. Whether or not it will is what depends.

Do know that if anything goes wrong, there’s a high chance the program could make your credit score worse.

On the other hand, some related things can also improve your credit over time. (Like paying down debt as agreed and reducing credit card high balances.)

A debt management program is not the only way pay down debt. You have options! For more ideas, check out this helpful info on how to get out of debt.

Whatever you decide, make sure you understand what you’re getting into, and whether it aligns with your plans.

How debt management programs affect your credit

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