One of the first questions many people ask about a Debt Management Plan is, "What will happen to my credit score?"

Your credit score may change when you begin a DMP, but that does not mean the program will ruin your credit. Many people may see their scores improve over time as they pay down debt and make consistent monthly payments.

You May See a Drop at First

The credit cards included in a Debt Management Plan are usually closed. This can temporarily affect your credit score by reducing your available credit and changing the average age of your accounts.

How much your score changes depends on your credit history, including your balances and whether you already have late payments or collection accounts.

What Does the Research Show? Study shows the score will increase.

A TransUnion study followed consumers who enrolled in and successfully completed a Debt Management Plan.

The average Vantage Score was:

• 597 when participants started the program
• 659 after 24 months
• 678 after 48 months
• 680 after 60 months

The study found that participants had higher average credit scores after two years, with scores continuing to improve over time.

Everyone's credit history is different, so results are not guaranteed. However, the findings show that paying down debt through a structured repayment plan may have a positive effect on credit.

Look at the Bigger Picture

Your credit score is important, but it is only one part of your financial health. Paying down debt, lowering interest costs, and making consistent payments can help you build a stronger financial future.

Consumer Credit offers free and confidential counseling. A certified credit counselor can review your budget and debts, explain your options, and help you decide whether a Debt Management Plan may be the right next step.