Debt consolidation without lowering your credit score?

Question

How can I consolidate my debt with a program without having it affect my credit score or credit file negatively?

Let me also add, that a bank loan to consolidate is almost not an option as my score is in the low 500 category.

ok, now let me also add, that I am a renter and therefore do not qualify for a home equity loan or consolidation loan based on your property ownership.

Answer 1

Get a loan from a bank without going through a consolidation program. If you still have good credit (or even average) there are banks that will give you a loan on the basis its being used for consolidation. Worst case scenario, use a credit counseling company until you are able to get your own loan. Credit counseling companies don't require you to sign a contract, so you can cancel at any time. Hope this helps!

Answer 2

The drop in your credit score will only be temporary.

Anytime you apply for a loan or credit card your credit goes down a little. However, debt consolidation is still a good idea, since paying off your debts increases your score. So you will get points for the debts you are paying off with your consolidation. Staying current with payments will also bring your score back up.

Make sure the consolidation has a lower interest rate than what you are currently paying, otherwise it may take even longer and be even harder to pay off.

Answer 3

It is hard to consolidate without a drop in credit score. The important thing is how much you drop it. The following site has some good information and a link that you can get a free debt consolidation analysis from. Limit the damage and you can recover quickly. Good luck.

Answer 4

Consolidation will always lower your credit score. And it can look as bad as if you went through bankruptcy.

First, get $1000 in an emergency fund ASAP for when the car needs a new alternator, fix a leak under the sink, fix the furnace, etc. This emergency fund should be in a simple savings account at the bank and only used for emergencies (not the leather couch you like).

Then do a budget. Write down all your expenses for the month (include daycare, eating out, groceries, dry cleaners, etc along with all your regular bills), add the amount up.

Give yourself some blow money (pocket money) for the month that you don't have to account for (example, we have $200 blow money budget each month, my husband gets $100 and I get $100. We each get $25/week, we both get paid bi-weekly but on opposite weeks. This money picks up the morning coffee or soda or occasional lunch out).

Then add up all your salary for the month. Most people find out they have an "excess" on paper but because they don't plan where the money is to go, they live paycheck to paycheck. Finish your budget by picking your smallest credit card/loan, etc and put the "excess" money on that bill. When that bill is paid off put the money to that credit card plus the excess on the next smallest bill. Example: Credit card balances with payments of $250/25, $400/40 & $1000/100; Excess money of $100; First month pay all your minimums besides the $250 card and pay $125 ($25 minimum plus $100 excess) do the same the next month. The third month put an extra $125 on the $400 balance, etc until all bills are paid off. This is called a debt snowball.

If you are way out of balance, look at what you owe on. If you're car balance is $18,000 and you make $30,000/year, sell the car!! If you are paying on a snowmobile, sell it. Sell extra clothes on Ebay, etc.

All the above information I learned by several financial gurus. But the one that laid it out in simple terms was Dave Ramsey. www.daveramsey.com On his website he has budget forms. He also tells you how to budget if you are on commission. His books are easy to read and follow. His financial peace university (FPU) 13 week course is very good and gets you in the habit of doing a budget before the start of every month.

ADDITION: Since you just said you have poor credit, do the above. Also Dave Ramsey explains how to deal with collection agencies if you are getting phone calls.

Answer 5

Depending on how long you have owned your property, I may know of a loan company that would take you on, couple that with debt settlement to save you money on any past due credit cards as well as getting you into a solid credit repair program to improve your score at the same time.