There is a lot of confusion in the world of credit counseling, which is why so many consumers have unpleasant experiences. Ilyce speaks with the Consumer Credit Counseling Services of Greater Atlanta to get the straight scoop.

Note: I have received several letters about debt management programs over the past few weeks that are similar to this one.

Q: Thanks for all of your advice. I was just listening to your radio show today and you were advising a caller who had debt trouble to call Consumer Credit Counseling Services (CCCS).

We did that a few years ago, and signed up for a debt management program. We recently got out of the program, because of favorable circumstances. However, because a notation exists for a few creditors on our credit report, we received a very high interest rate on our recent refinance.

Our lender told us that the notation stays on our report for 7 years, and is essentially looked down upon by lenders even more than a bankruptcy.

We have tried to contact the creditors to get the information off the credit report, but to no avail. If the 7-year rule is not true, please tell me how to change the notations on my credit report. If it is true, please inform your readers and listeners about this, as some are naively led into the program without knowing that this will cause long-term damage to our credit reports and scores.

A: Although I frequently hear the complaints you listed from other people about their debt management programs, it doesn’t jive with what I’ve heard from the top credit counseling experts from around the country.

But there’s enough truth in what you say to confuse anyone. In an effort to avoid “truthiness,” let’s see if we can separate fact from fiction.

According to Todd Mark, spokesperson for Consumer Credit Counseling Services of Greater Atlanta (, being enrolled in a debt management program sponsored by a legitimate credit counseling agency should not have a negative impact on your credit score.

But the fact that you have these debts, delinquencies, late payments and other negative information listed on your credit history, can cause your credit score to drop. In addition, when you pay less than what was owed to a creditor even if the creditor agrees to take less money from you, your credit may be negatively affected.

Mark says that creditors will note that you’re enrolled in a debt management program in one of several ways, including saying that your debt is being “paid as agreed under management.” The word “management” is a red flag for future creditors.

The issue is less whether you are enrolled in the debt management program, but more whether you pay off all of your debts in full. If you negotiate a partial payment with all of your creditors, your credit score may take a hit. If you pay off all of your creditors every cent you owe them, your credit history should show that you paid your debts off in full, rather than a reduced amount agreed to by the lender.

Obviously, in either case, you must make sure to make all of your payments on time and stick with the debt management program.

“But most of your current creditors will ‘re-age’ your account within 3 to 6 months of on-time payments to say that the debt you owe is ‘paid as agreed’,” explains Mark. He adds that the reason a creditor will re-age your account is because you’re making a good faith effort to pay your bills on time.

When this happens, the “management” red flag goes away. You can also make this happen by getting your creditor to agree upfront, as part of the repayment plan that the account will reflect the debt as being “paid as agreed” without the “management” tag.

This is important, because if they agree to report the debt as paid, they will also agree not to report it in a way that will ding your credit history.

Of course, applying for additional credit once you’re in a debt management program is a no-no. If you do that, you might get offered a ridiculously high interest rate for this new line of credit. When you’re in a debt management program you’re supposed to simply manage (and pay off) the debts that you have.

Mark says that once a CCCS of Greater Atlanta customer has made 12 months of consecutive on-time payments through the debt management program, the lenders who are affiliated will offer these borrowers market rates based on the new payment history through CCCS rather than the borrowers’ own past history.

“If the best mortgage rate is 6 percent for a 30-year loan, then that’s what you’ll get,” Mark notes.

However, once you get out of the debt management program, your paid-off debts should be listed as “paid as agreed.” The debts that weren’t re-aged as part of the CCCS program, and still reflect your past problems would continue to stay on your credit history for up to 7 years — as you’d expect them to.

As time goes on, these negative pieces of information will have less of a negative effect on your credit history. But that won’t help you much as you try to rebuild your credit history.

Rereading your letter, it seems as though you may not have done enough shopping around for a lender who would give you a break for having gone through a debt management program and paid off your debts. It’s even possible that you fell into the hands of a predatory lender, who decided to take advantage of you and charge you a lot higher interest rate than you might legitimately be entitled to get.

As Mark says, once you’ve paid off your debts and manage your credit well for a year, you should qualify for a reasonable rate.

If you weren’t able to find a lender who would work with you, you could have gone back to the CCCS office that assisted you to ask for a list of lenders affiliated with the organization, and who may be more inclined to give you a better interest rate.

Mark agrees with me that there is a lot of confusion in the world of credit counseling, which is why so many consumers have unpleasant experiences.

For more information on debt management programs, check out or the website of the National Foundation for Consumer Credit, at