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Can You Get New Credit Cards While on a Debt Management Plan?

New credit cards on a debt management plan? Cambridge Credit Counseling explains creditor expectations, what happens to accounts, and life after the plan.

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Most creditors expect you to stop opening new credit cards while you are on a debt management plan. Accounts placed on a Cambridge Credit Counseling plan are closed while you are enrolled, so applying for new credit could go against the plan’s terms. You can apply for new credit again after you finish paying off your accounts in full. However, you’re not always obligated to close all of your accounts when joining a DMP. Some clients choose to leave some accounts off the program to have on-hand in case of an emergency. Your counselor will be able to advise you on your specific situation and make the appropriate recommendations.

Why Accounts Are Closed During the Plan#

Accounts placed on a Cambridge Credit Counseling debt management plan are closed while the client is on the program. After the accounts are paid in full, the client must re-apply with the banks to obtain new credit. This is part of how the plan works, not a separate penalty. However, it’s not always necessary to include all of your accounts on the program. Some clients choose to keep one or two accounts off the plan to use in case of an emergency.

How Creditor Concessions Fit In#

On a debt management plan, almost all concessions such as reduced interest rates or waived fees follow preset guidelines set by each creditor, not by the counseling agency. In some cases they can vary based on the level of hardship in the budget, and certain accounts may not be eligible for them. Creditor benefits on a Cambridge Credit Counseling plan can include reducing interest rates, bringing past due accounts current, and eliminating or reducing late and over limit fees. Because these arrangements are between you and each creditor, opening new credit accounts while enrolled is not part of the plan.

Charge-Off Timelines Still Apply#

Creditors have a legal obligation to charge off accounts once they reach a certain number of days past due, and the exact schedule can differ depending on whether the account is on a repayment plan or not. This is a separate process from applying for new credit, but it shows why staying current on the accounts already in the plan matters.

Applying for Credit After You Complete the Plan#

Once accounts on a Cambridge Credit Counseling plan are paid in full, you are free to re-apply with the banks for new credit. The Equal Credit Opportunity Act ensures that all consumers are given an equal chance to obtain credit and protects consumers who apply for financing with any creditor who regularly extends credit, including banks, credit card companies, and credit unions. This protection applies to you whether or not you have completed a debt management plan.

Does the Plan Itself Affect Your Credit Score

On a Cambridge Credit Counseling debt management plan, enrolling in the plan itself is not a factor in your credit score and is considered a neutral mark. That said, establishing a debt management plan may adversely affect your credit, though the effect may be temporary as you remain committed to making monthly payments through your Debt Management Plan. That is because accounts included on the plan must be closed. Though scores can dip at enrollment when accounts are closed as a trade-off for rate reductions and/or fee waivers, scores typically rebound over the program’s term, as balances are paid down every month. However, nonpayment of debt may lead creditors to increase finance and other charges or undertake collection activity, including litigation. Your credit picture depends on your full history, not just the plan.

What To Do Next#

If you are trying to decide whether a debt management plan is right for you, Cambridge Credit Counseling offers a personalized, one-on-one debt analysis with a nationally certified credit counselor to see whether you qualify. This personalized financial assessment is 100% free. There is never any obligation to enroll after a credit counseling session, so you can talk with a counselor and decide from there.

Common questions

Will I lose my credit cards if I join a debt management plan?

Accounts placed on a Cambridge Credit Counseling debt management program are closed while you are enrolled. After the accounts are paid in full, you must re-apply with the banks to obtain new credit.

Can creditors reduce my interest rate on a debt management plan?

Almost all concessions such as reduced interest rates or waived fees follow preset guidelines set by each creditor, not by the counseling agency. In some cases they can vary based on the level of hardship in the budget, and certain accounts may not be eligible for them.

Does a debt management plan hurt my credit score?

On a Cambridge Credit Counseling debt management plan, participating in the plan is not itself a factor in your credit score and is considered a neutral mark. However, establishing a debt management plan may adversely affect your credit, though the effect may be temporary as you remain committed to making monthly payments through your Debt Management Plan. Nonpayment of debt may lead creditors to increase finance and other charges or undertake collection activity, including litigation.

Can I apply for new credit after I finish my Cambridge Credit Counseling plan?

Yes. Once accounts on the plan are paid in full, you can re-apply with the banks for new credit. The Equal Credit Opportunity Act protects your equal chance to obtain credit from banks, credit card companies, and credit unions.

Is there a cost to find out if I qualify for a debt management plan?

Clients enrolling in a Cambridge Credit Counseling debt management plan receive a free financial assessment, along with a payment plan with a pay date of their choosing.

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