“Dear Steve,
Racked up credit card debt when I was young
I have about $17,000 in credit card debt. I heard about Money Management International because Bank of America recommended them to me because I was trying to get my payments lower. Is this company legit? How bad will my credit drop?
Dave”
Dear Dave,
Regardless of what a credit counseling agency may tell you, there will be some impact on your credit when the included accounts are closed by the creditor. It terminates your history on that card and that impacts your credit. How much, well points of view differ on that.
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A while back I wrote Why Enrolling in a Credit Counseling Program Can Hurt Your Credit Score that might serve to address these issues.
But really, an impact to your credit or maintaining your credit isn’t the reason to enroll in any credit counseling debt management plan. The ultimate reason is you are struggling financially and need intervention.
Unless you are currently behind on your accounts and have a big past due balance, which increases your payment, I would be surprised if a debt management plan would significantly lower your payment.
If you are struggling to get by there are several major debt relief intervention tools to use. You can use the free How to Get Out of Debt Calculator to review your options.
Just based on what you shared, the most logical way to “lower” your payment, if the Money Management International plan does not, might be an unsecured debt consolidation through someone like LendingClub.com. An unsecured debt consolidation loan can increase and maintain your credit score since you would not be required to close the accounts once they are paid off.
Please post your responses and follow-up messages to me on this in the comments section below.
