Wednesday, April 12, 2006

Learning New Things

Wow, I don't know where to start. I was reading another PF blog I like this morning and her post scared the poo out of me. She linked to this article which talks about how paying old debt can hurt your score...


I recently joined a debt management program (DMP). Actually I started in January, so this is my fourth month making payments. To be perfectly honest, I didn't really do much research before joining. Originally I had planned to sign up with Consumer Credit Counseling Services which was recommended to me by a couple of people and seemed to be pretty reputable ( by the way, their site has some nice resources), but after talking with a counselor and discussing the process I wasn't confident. I decided to just take it like a man and sign up and I had every intention of doing so! I received the forms in the mail and began gathering all of my statements and pay stubs to send back. The envelope was all ready to go, for about two months... I just needed a stamp. Yeah, I'm one of those people who handles all of their business online. I can't even remember the last time I stepped foot in a post office. Seriously, if I had to mail in payments for anything, all of of my utilities would be shut off. Anyway, the envelope sat on my desk, then moved to my bag (which I thought would remind me to buy a stamp), and eventually back to my desk.

So, about 3 or 4 months passed (I know) and my mom and I were talking about debt one day. She told me about some DMP she saw on MSNBC. I wanted to check out for myself, so I went to their site. Naturally, my first thought was "wow, their site is much more aesthetically pleasing", which is a big deal to me...

Can I just mention now that a big reason I didn't like CCCS was because I would required to mail a money order every month. Not going to happen.

I ended up joining the program right away. It had a lot of good reviews, nice web design, and I could take care of everything online! A counselor explained the monthly payments and how the cash would be distributed to my creditors. She also explained that some creditors would lower the interest rates for the DMP and to keep track of my statements...blah blah blah. I should probably confess that I don't even look at my statements. I rarely even open the envelopes. So I asked if joining the program would improve my credit, which she said it would help. I know that each item stays on your credit for 7 years, and that there is no company that can "fix" or "clean" your credit report, but I was just hoping for some improvement.

Now to my point...

Have I got it all wrong? Was beginning a DMP the wrong decision? I was under the impression that paying off old debts was good. I believed over time, I could pay everything off and gradually see some positive change in my score. Last I checked, (before DMP) it was a 560.
VERY low, but it used it be lower - believe it or not. I'm not one of the people who "live or die by their credit score", but I would really like to buy a home and maybe a car in the next 7 years. Am I totally screwed?


Blogger pghcitiboy said...

You're not screwed at all. In my very early 20s my credit was a total mess. I paid stuff off late and really didn't care until I learned about the impact of doing this until I applied for a line of credit at some store and was denied.

Over the years I've slowly improved it to the point where I'm at something in the upper 800s now. It won't happen overnight, but it can be done.

10:53 AM  

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