Debt can be a helpful tool when you’re facing a financial emergency. However, taking on more debt than you can handle becomes problematic in the future. 

Using debt to purchase an asset, such as a home, is a wise move. However, maxing out credit cards to bridge the gap between your income and expenses can be harmful. If you find it challenging to repay your existing debt, debt management can help. 

In this guide, we’ll list your options, how debt management works, and if it impacts your credit score. 

What Is Debt Management?

Debt management refers to creating a plan to handle your liabilities effectively. The aim is to make your repayments on time and pay off your debt without hurting your credit score. It’s essential to your financial well-being because unmanaged debts can have serious consequences.

Debt management can be done on your own, with the help of a debt relief company or a credit counseling agency. Each works in a different way, so it’s important to have a clear understanding of what they involve.

How Debt Management Works

There are a few different approaches to managing your debt. Here’s how they work.

Do-It-Yourself Debt Management

The most accessible approach to managing your debt is by doing it yourself. The most significant advantage of this DIY approach is that it motivates you to learn money management skills and makes you self-reliant. 

Additionally, no one understands your financial situation, spending habits, and mindset better than you. Here's what DIY debt management involves:

  • Only take on debt if you’re confident about repaying. Think about whether you need to borrow, how much you need, and how you’ll repay it on time.
  • Don’t use debt to purchase things you don’t really need. Taking on debts for large purchases regularly can make it difficult for you to repay them later.
  • Try to repay and become debt-free as quickly as you can. Never miss your monthly payments to avoid late fees, or make the minimum payments at the least. Try the debt snowball method or debt avalanche method to repay multiple debts.
  • Build an emergency fund for unforeseen problems like medical bills
  • Negotiate with your lenders for a better repayment plan. 

Remember that this is a “prevention is better than a cure” approach, where you stay disciplined and repay on time. If your debts are not streamlined, and you need help with management, consider working with a professional. 


  • Helps you learn essential money management skills
  • Increases confidence
  • Makes you self-reliant 
  • Cost-effective 
  • Allows you to create a plan that fits your needs perfectly


  • May not be the best option if you have a lot of debt 
  • Not suitable for complex debt situations, such as those with collections or wage garnishment 
  • Requires a lot of discipline, and support may not be available when you need it from friends, family, or other professionals.

Debt Management With a Credit Counseling Agency

Under this approach, you use a credit counseling agency to develop an effective debt management strategy. 

These counselors can be for-profit and not-for-profit; however, the latter is more common. You can search NFCC's website (National Foundation for Credit Counseling) to find the best certified credit counselors. 

The counselor takes charge of all your debt accounts and develops a strategy to pay off and close out your debts as quickly as possible. This can include negotiating with creditors, talking to debt collectors for defaulted loan accounts and debt relief options, scouring balance transfer debt consolidation plans, and providing financial counseling sessions. 

Your credit counselor can also enroll you in a debt management program, which provides you with a structured plan to repay your unsecured debts as efficiently and effectively as possible. 


  • Financial counseling sessions 
  • Guidance on how to get out of debt 
  • Doesn’t require taking on any new loans or credit cards 
  • May lower interest rates or waive penalties and fees


There are only two drawbacks to this approach - first, you'll have to pay the counselor a setup fee and a monthly fee, and second, you will relinquish control of your debt accounts during counseling, as the credit counseling agency will manage your accounts and may even disperse your payments to your creditors on your behalf.

Debt Management With a Debt Relief Company

You can also manage your debt with the help of a debt relief company. Although you can also talk directly to your creditor(s) and negotiate a debt relief plan - most creditors, such as credit card companies, may not take you seriously.

The intermediary (debt relief company) negotiates with your creditor for lower interest rates on your outstanding debt and sets up a payment plan. They can also negotiate a debt settlement with your lenders. 

The company collects the payment from you and distributes the monthly payments to your creditors. So you’ll only make one payment and don’t have to worry about managing multiple monthly payments. These repayment plans usually last between three and five years. 


  • May be able to get out of debt sooner
  • May be able to lower interest rates and waive fees
  • Fees may be success-based, meaning you’ll only pay the company fees when you see genuine results


  • Some companies may charge higher fees based on the amount and type of enrolled debt
  • May have to close credit accounts

When Should You Take the Help of a Debt Management Company:

  • You have multiple high-interest unsecured debt accounts, and you’re unable to manage/pay them.
  • You don't need to open a new credit account anytime soon. It will likely be difficult to do if you already have a low credit score and/or because your score may be impacted further by some of the techniques implemented by your debt management company.
  • Your credit score is lower due to late fees and missed payments.

Do You Qualify for Debt Management?

Here are the prerequisites to qualify for a debt management program:

  • Only unsecured debts, like credit cards, lines of credit, student loans, and medical bills, are eligible for a DMP. There's no minimum debt required to qualify.
  • A reliable source of income.
  • Your income is neither too low nor too high for your debts.

If you're unsure if you qualify or would like to see a more personalized program layout, get a free debt management quote from the company you’d like to work with.

Does Debt Management Affect Your Credit Score?

Usually, DIY debt management will help you improve your credit score because it focuses on making on-time payments and reducing your credit utilization ratio

If you opt for a debt management program with a relief company, your credit score should see a positive impact in the long term. Alongside a timely payment history, you will also start to reduce your debts quickly. 

Finally, if you are enrolled in a credit counseling or debt management program, it will appear on your credit report. It may not affect your credit score, but most lenders will not lend to you if you are enrolled in one of these programs.

Use Debt Management to Pay Off Multiple Debts

Debt management through a certified counselor is the right approach when you’re overburdened with multiple debts. If these DMPs don’t work for you, the next best approach is to look for debt relief companies that will assist you in negotiating with your creditors and arriving at agreeable terms through a debt relief program.