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I have a somewhat decent credit rating (around 650)BUT major debt. :( As a single mom I struggle every month to make sure all of my creditors are paid ON TIME every month and I also make sure I pay a little more than the minimum requested. However, I can't seem to get the balances down b/c the interest rates are so darn high and anytime I make a little headway, I end up having to use the card again for some emergency or work/child related expense. I am under the impression that debt consolidation would have a negative effect on my credit rating. Is that correct? And if so, any other suggestion on how to get out of this credit card debt without it negatively affecting my credit rating? (I do not own a home so I can not utilize a home equity loan). Thanks for any information you may provide. :D




Hi Chandler

Welcome to the forums. I appreciate the hard efforts that you are making to fulfill the needs of your family. First of all, I would like to clear the point that debt consolidation does not have any negative impact on your credit rating. debt consolidation program puts your ruined credit report in good shape and thus helps you in acquiring your credit worthiness. You are required to retain your good credit rating for the future and debt consolidation program will make it happen faster and in a secure way.

As you are concentrating in making regular payments to your creditors and paying more than the minimum amount, you are not able to reduce the overall debt as because of the high interest rates. Debt consolidation program at this point will do proper negotiations with your creditors and your creditors will appreciate your enrollment in the debt consolidation program. They will find you taking this responsibility to erase your past debt and acquire your credit worthiness. For this reason, they will be willing to reduce or eliminate the financial charges and/or the late fees accrued in your total debt and settle for a reduce amount. Thus, you will be offered a low monthly payment and at lower rate of interest which will be suitable to your present needs and easier to repay your debt. You will also be free from the hassles of skipping any particular credit card account in the current billing cycle which might add further interest due to it.

In the debt consolidation program, as long as you stay current on the consolidation payments, your credit rating will be viewed more favorably than before.

Debt consolidation program will appear in your credit report and it will show that you are improving your present financial standing. As debt consolidation program will be covering most of the accounts which might be in default, your creditors will be paid in regular installments. Your credit report will show that you have experienced financial difficulties in the recent past and you have taken active steps to repair it through the debt consolidation program.

Your creditors report your accounts to the credit bureaus. Although your report will show that you have been unable to pay the original amount of the creditors and have accepted the reduced amount through the debt consolidation program, the consultant working in the debt consolidation program will be able to negotiate with your creditors for the best of your credit ratings.

The ultimate goal of the debt consolidation program is to improve your financial and credit standing and it will shape your financial rating from what is today to a better tomorrow.

Regards
Roxette

Sub: #1 posted on Tue, 07/05/2005 - 01:12

roxette roxette

(Posts: 4009 | Credits: 559.9)

The original message is an old post, but it applies to my question today.

Roxette, please excuse my foggy head, but I'm a bit confused by your reply to Chandler 19's post. I'm new here and am spinning with all the information, but what you explained sounded more like (from what I've read here) debt settlement.

Chandler stated that her credit rating was fairly good, but making ends meet due to the high interest rates is getting harder and harder. Your response kept referring to debt consolidation as helping with ruined credit. I think I am totally confused.

I am in the exact same boat as Chandler. My credit score is over 700, but my credit card debts and personal loans are squeezing me dry. I pay them all on time with a little more than the minimum, but there is nothing left at the end of the month for emergencies, other living expenses or an opportunity to pay any of these off. I too do not own a home, and I don't want to ruin my credit rating so I think a settlement is out of the question.

Based on what you said Roxette, is a consolidation similiar?

Please someone...help straighten me out!

Sub: #2 posted on Mon, 03/31/2008 - 06:26

janiece janiece

(Posts: 7 | Credits: 3.01)

Hey Janiece, as roxette isn't around the forums for a while I'm taking the opportunity to reply t your post :wink: Hope he will soon be around with more clarifications.

debt settlement and debt consolidation are not exactly the same, though both will work towards reducing your debt burden.

The debt consolidation company will negotiate a lower interest rate with your lenders and will consolidate all the loan payments into a single payment. You may required to take a debt consolidation loan to participate in the program.

However,you may need work on two different consolidation strategies as student loans are consolidated in a different way in US.

The Federal Direct Student Loan program allows students to amalgamate their Stafford loans, Plus loans and Federal Perkins loans into a single loan with a lower and fixed interest rate. Usually, this loan will have a longer term period then the original loans to allow the debtor to repay it more comfortably.

Sub: #3 posted on Mon, 03/31/2008 - 14:23

tweetyturner tweetyturner

(Posts: 278 | Credits: 32.99)

tweety you seem to be my guardian angel-bird! :D Thank you for the several replies you have offered.

I don't think I'm going to be able to do anything with the student loans as they are already consolidated with AES. My interest rate on that loan is a fixed 8.250%. Honestly for it being a student loan, I don't know if that is a good rate or not.

I just want to reduce my monthly payments with as little effect on my credit score as possible. Still trying to figure that one out.

Anyway thank you again for all your help

Sub: #4 posted on Mon, 03/31/2008 - 16:56

janiece janiece

(Posts: 7 | Credits: 3.01)

You are welcome janiece, I'll be extremely glad if I can be of any help to you.

Regarding more financial help, you can registered with the site for free consultation. The professionals can help you in understanding your financial situation better.

Hope you find this information helpful.

Sub: #5 posted on Wed, 04/02/2008 - 16:55

tweetyturner tweetyturner

(Posts: 278 | Credits: 32.99)

Chandler,

Do you feel comfortable talking to the credit card companies yourself, to discuss a lower interest rate? That may be a start.

Sub: #6 posted on Thu, 04/03/2008 - 01:42

dbcoders dbcoders

(Posts: 36 | Credits: 6.38)

I am stuggling myself; but making an effort and have set up an appointment with someone about my own situation. With that said; I am still confused by the above. Will either consolidation and/or settlement hurt the credit score? To me the question has not been answered....

Thanks for your feedback...

Sub: #7 posted on Thu, 04/03/2008 - 02:36

purplegirl69 purplegirl69

(Posts: 250 | Credits: 40.58)

debt settlement will hurt your score a lot. When I was a mortgage broker, the absolute worst credit scores I ever saw were people who had been through debt negotiation companies, and I mean worse scores than recent bankruptcies, vehicle reposessions, even home foreclosures.

Which makes sense, if you think about it. A typical debt negotiation plan involves you stop paying your debts and diverting those payments into an escrow account that the debt negotiation company will later use to settle your debts. The credit bureaus and Fair-Isaac company (which produces the FICO score) has no way of knowing your plan is to settle your debt, all they know is you've stopped paying everything.

Over time, after all the accounts have charged off, they often show up again as they get transfered or sold to collection agencies, only now with higher balances to represent accumulated late fees and interest charges.

Then you start to accumulate judgements on your credit report, as some of your creditors opt to sue, because they're too low on the list to be settled.

Consumer credit counseling type agencies are much better on your credit scores.

Sub: #8 posted on Thu, 04/03/2008 - 06:33

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