 TITLE: A Debt Management Plan: Is It Right for You? CONTENT: Does a Debt Management Plan Affect Credit?\n------------------------------------------\nWorking with a credit counselor or starting a DMP won't have a direct impact on your credit scores. However, notes that you're working with a counselor or using a DMP could be added to your credit report, and the DMP process can indirectly impact your credit in several ways:\n*   **Closing accounts may increase utilization.** Your credit utilization ratio is the percentage of your total available credit on revolving accounts (such as credit cards) that you're currently using. A lower utilization ratio is better for your scores. Closing credit cards can decrease your available credit and lead to a higher utilization ratio if you keep other non-DMP credit card accounts open.  \n    The exact impact, however, will depend on your specific situation and the type of credit score. Some scoring models won't include any closed accounts in utilization calculations, while others—including FICO—may include closed accounts that have a balance when determining utilization.\n*   **Bringing accounts current can help you build positive payment history.** If your creditors agree to re-age your past-due accounts and change their status to current, your monthly DMP payment will result in on-time payments on all accounts included in your DMP. These can help you build positive payment history, which is the most important credit scoring factor.\n*   **You'll repay your accounts in full.** A DMP can result in waived fees and lower interest rates, but you'll still be paying your accounts in full when you complete the DMP. This may be better for your credit than settling debts for less than the full amount.\nKeep in mind, too, that contrary to popular belief, closing credit accounts won't immediately impact the length of your credit history and the mix of account types in your credit history. Closed accounts can stay on your credit reports for up to 10 years, and they can continue to impact your credit history's length and credit mix during this time. As a result, closing accounts as part of a DMP (or for any other reason), won't have an impact on these scoring factors for a long time. END