Whcih system is worse on your credit score?

Question

There are two types debt management programs. One is where a company negotiates lower interest rates, you pay them, then they pay all your credit cards every month.. The other type is a company that negotiates a settlement for less than amount owed. This company just pays one card at a time, and get them paid off quicker than the first option. Which type is worse to have on your credit report?

Answer 1

Neither type necessarily shows up on your credit report. What does appear are your payment histories and account status.

If a creditor decides to show that you were on a debt management plan (reduced interest), then that notation would drop once the balance was zero. The notation does not factor into your score.

If you try debt settlement, then each account will show settled for less than the actual balance for a period of seven years following the last date of activity. Furthermore, there are additional costs and taxes that result if you settle on a debt.

Answer 2

In the eyes of creditors they are equally bad. You are having to negotiate your debt, which you cannot afford. That will be submitted to the 3 major agencies. Upon trying to re-establish your credit, that will be viewed as a negative. Now, if your credit is already marred by late payments and your score is low, the best thing to do is just continue paying on your debt on time. The biggest factors in credit rating is debt/availability (how much you are allowed to borrow per account verses how much you owe - ie. Discover limit 5,000 you owe 4,900), whether you have any late payments, length of credit history and how many inquiries you have within a certain amount of time.

If you are so far under you cannot see daylight then negotiation is the best since your credit is shot anyway...unless you have continued to pay the minimun on time, only your debt/amount available is too high. The best thing is to keep your on time payments, but reduce your spending and concentrate on paying down your debt. It may take you awhile, but in the l long run this will be best for you. Everyone looks at your credit and is tied into it. The lower your score the more you pay for everything else.

I hope this helps you.

Answer 3

Personaly, I wouldn't take either of them.

Do it your self.

Their was one story where a someone paid x amount of money every month to this one outfit that was supposed to pay all his bills for a negotiated settlement.

The clients score took a nose dive. The due date for one of the bills was before the clients scheduled monthly payment and the company never paid the bill on time. No one at the company ever put 2 and 2 together and the client suffered.

Answer 4

You need to research those places that "help" you with your debt. Some are not good, others are helpful. Try the negotiations by yourself first, see if they will work with you. It is best to pay off the amount you owe, if you don't that will show to a certain extent from what I understand they will "charge off" that amount and that does not look good. So, I would check that out. Also, I hope you will treat your finances with more respect and not get yourself into any more debt.

Answer 5

They are both bad for your credit report. Paying to have someone lower an interest rate is a waste of money. You can call a credit card company and ask for you interest to go down. Anything that a company can do with your credit, you can do, and you can probably do it better. But that's my $.02! You gotta do with you think is best.

Answer 6

Credit Score
http://www.debt-loan-refinance-mortgage-credit.com/category/Credit-Score-Myths-Explained.html

Answer 7

Pick number one it sounds better I,ll say number two