Consumers enrolled in a Debt Management Program, are still considered ¨current¨ delinquent accounts by most creditors even after receiving one or few consecutive payments paid through the debt management agency. The process and time frame varies with each creditor and type of account. While some creditors stop others may continue to tag them as delinquent especially cases involving personal loans, note accounts and lines of credit.

What is Actually Happening?

Consumers should expect all accounts to run at least one month late in the initial phase of the program and this applies to those accounts that are current upon enrollment. Also some creditors¨ require a waiting period of three consecutive payments made through the agency prior to re-aging the account, so a ¨past due¨ status may show for up to four months and probably late fees are also assessed during this period. In most cases, creditors have a system to rectify this initial past due status and given a current status within one to four months of enrollment.

Therefore, when evaluating the program effectiveness on your credit report, clients should expect their credit report to reflect late payments in the initial phase of the program. If the account does not become current after four months, it means either the creditor unintentionally did not update the client's account, or simply does not offer a re-aging program. In this case, the client will be required to pay the past due amount for the account to become current. Except for accounts that are charged off clients will then start receiving statements from their creditors. The client can pay anything within the required minimum due to clear his account and improve credit reporting.

Consumer credit counseling and debt management agencies do not report to credit reporting agencies, and cannot wipe out records of poor performance from your credit file. Only creditors have the discretion to write or amend these reports. However, if a creditor does not remove an erroneous entry when a client requests it then the law enforces the credit reporting agency to remove it.

If you already have a good credit rating but wish to join a debt management program because you are facing a financial crisis do consider the impact it might have on your credit report. Most probably some or all accounts may initially run past due which could adversely affect good credit scores.

Conclusion

Enroll into a debt management program only if your circumstances force you to. A Debt Management center can inform you on the pros and cons of enrollment. Irrespective of agencies that enroll consumers in a debt management program, only creditors have the power to issue a report and give status of account. No doubt a consumer is allowed to request a creditor to remove derogatory information from their report. Unless there is some benefit for creditors it is unlikely that they will remove accurate information.