Debt Management Assistance Services Vs. Bankruptcy: How Do They Affect Your Credit Rating?

So, your credit card payments have gotten out of hand? It's getting too hard to make the payments on the car loan, plus keeping up with the medical bills and paying down that gas card? You may be tempted by a debt management assistance service. What do these places do for you? One of the best-known, CCCS (Consumer Credit Counseling Service) reports on its website that it and Money Management International are "non-profit community service organizations that provide confidential financial guidance, debt management assistance and free consumer credit counseling services."

I'm not running down services like this when they are used correctly-honest. Financial guru Suze Orman recommends CCCS for people who need it. What I am saying is that there's something they don't tell you about these services, and that is, they can trash your credit rating.

Here's my experience. About twelve years ago, my husband and I were living on his fairly small salary with two small kids. We used credit cards too much and had a car payment, and we decided that our monthly bills were mounting excessively. We needed to cut back. Keep in mind that we weren't behind on any of our payments on anything, we just decided that we ought to be budgeting more carefully.

We heard about CCCS and it sounded good. We wanted to take a firm step to force ourselves to get debt under control-this seemed like it. So we signed up. (I actually thought, if I thought at all, that this step would IMPROVE our credit rating.)

CCCS took over our debts and arranged a monthly payment. We would pay them, and they'd pay our creditors for us. Of course, we had to promise not to sign up for any more credit, and we wouldn't be able to use our credit cards any more, but we were okay with that. We wanted to get out of debt. As I recall, it was going to take about five years to get everything paid off, but we were started! Seemed great.