If I use a debt consolidation service to help pay off my cc's, why would my credit report take a negative hit?
Question:
Answer:
Initially, your credit will take a hit. However, some of that is from what you had happening before you consolidated the debt.
Once you enter into an agreement, you are not allowed to obtain anymore debt (including buying a home) until it is completely all payed off. Once everything is payed, your credit score will be better.
I say go for it. I know someone who did this, and their credit is great now.
It's negative, but not as bad as having unpaid debts go to collections.
That's just the way it is...they way they said.when you go to a consolidation service they make you cut up your credit cards and put a negative notation on your credit report. Thre is no why...this is the deal you take when you apply for consolidation service.
If you don't like losing your cards and having the negative rating then pay off your bills yourself thru your own monthly budget.
Because credit bureaus realize that most Americans get another credit card after they consolidate their debt and then they run that one up as well. 'Con' solidation, as the great Dave Ramsey would say, is a bad way to solve your credit card problems. Paying down the balance is the only way to get out of trouble and increase your credit score.
Possibly it was not a "debt consolidation service" that helped you but a "debt settlement company."
If you truly consolidate all your debt into one account, say, the total amount (principle) due would be the same. The consolidated loan account might reduce total interest rate so you save interest payments, but you still pay the whole principle off as with Home Equity Loans.
If you settle with a company that agrees to negotiate your debt principle down, get a lower interest rate and have one monthly payment, then you have, in essence, still have bad debts that were negotiated. It's a simplified way of bankruptcy but not really, and unfortunately still gives you negative hit to credit rating.
Basically, find out if the principle of the debts "consolidated" are the same before consolidating. If not, you settled, you get a hit. If they are the same, you consolidated and should not have gotten a hit.
If an error has been made to your credit report, contact the credit bureau that the cosolidation company reports to. If you don't know that, contact the Federal Trade Commission to find out who to contact.
And finally, if you did get a negative hit, and it is determined the method of consolidation was the cause, start now to pay bills every month when due, and don't miss any payments. Over series of consecutive payments made on time to all debtors, your credit rating should go up, albeit slowly. It's the most recent months of payment history on debts that is calculated to find credit score, not your full debt history since you first got a credit card or loan in your life.
it won't.
Consolidating means creating a whole new loan for a longer period of time. This would hopefully lower your payments enough so you can get back on track, in this case it might SAVE your credit score.
A credit counselor will give you some tools and suggestions for reducing your payments, just keep an eye on what the % are, you want it to be lower than what you pay now.
However, debt consolidation can be nothing more than a way of putting off the evitable. It really does little to correct the problem. That's why many people come back to debt negotiation as a way of getting out of their financial problems and starting fresh start.
this is where you can find trustful people,it helped me thus far
http://debt-consolidation.50webs.org...
More Related Questions & Answers...