Credit glossary
Debt management plan (DMP)
An arrangement through a credit counseling agency in which you make one monthly payment that it distributes to your creditors.
The CFPB says a plan typically lowers your monthly payments and can reduce interest and fees, and the FTC says it can take 48 months or more to finish. You may have to agree not to apply for or use more credit until it's done. Plans aren't for secured debts like a mortgage or car loan, and you should confirm each creditor has accepted the plan before paying through it.
Enrolling isn't scored as a negative event by itself. The effects come from what happens around it: enrolled cards are often closed, which can push utilization up at first, while steady on-time payments and falling balances help over the life of the plan. Compared with debt settlement, accounts in a completed plan are generally paid in full rather than settled.
Guides that go deeper
- Debt management plans and your credit score: what actually movesA debt management plan doesn't add a negative mark by itself, but closing your cards does change your utilization. How it works, with the math and the tradeoffs.
- Debt snowball vs. avalanche: the real dollar difference, worked outWe ran four real-looking debts through both payoff methods month by month. Avalanche saved $167 here, snowball won its first payoff 9 months sooner.
Sources
- What is credit counseling?, Consumer Financial Protection Bureau
- How To Get Out of Debt, Federal Trade Commission
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.