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Do Debt Management Companies Hurt Your Credit Score?

It's not unusual to hear about people who have exhausted all their lines of credit and are finding it difficult to make payments on time -- you might even be one of them! It would then be understandable if you would want to avail of the services of a debt management company to help you plan a way to make timely payments and pay off your debts gradually. But you might be concerned about one issue: do debt management companies hurt your credit score?

This is an issue of prioritization and having a long-term perspective. Some financial management experts are flabbergasted that people with such financial problems would want to apply for more credit, when they are having trouble finding ways to pay off what they already owe! These experts suggest that while debt management companies hurt your credit score in the short term, they can be of immense benefit in the long run. The object of the game is to pay off your debts, and a debt management company can offer invaluable advice and service to help you do just this.

Also, there's at least one financial management expert who says that going into debt counseling or debt consolidation will not hurt your credit score. Craig Watts, an executive of Fair, Isaac and Co., says that people who participate in credit counseling should not be penalized with lower scores. In fact, when this company calculates a person's credit score, it doesn't take away points for credit counseling. However, do remember that availing of the help of a debt management company can jeopardize your chances of applying for new credit, and this would make things difficult somewhat if you really need additional credit. But if you don't, then it's just as well, because some debt management companies will not allow their customers to apply for new credit because as mentioned earlier, the object is to pay off the old debts first before acquiring new ones.

Remember that changing your credit score for the better all boils down to paying off the money you owe. Whether you do it by yourself or with the help of financial management professionals doesn't really matter to creditors. And in this way, the question of whether debt management companies hurt your credit score becomes moot and academic.