Pay it off myself, or go to a credit reduction agency?

Question

I'm 23 years old, and I'm 1500 dollars in credit debt. It's impossible to find a renting place for an apartment with the bad credit, so I come to the friendly people here for some advice. Is it better, in the long run, to pay off the credit debt myself, or to go to a debt reduction agency and have them work with me to get it paid off?

Answer 1

Set up payment arrangements. If you have a track record, even tho' the debt isn't fully paid, most apartments will accept you. You could also deal with the creditor to negotiate a reduced settlement amount, such as elimination of penalty and interest. BUT, you have to have a good reason. Also anytime you deal with a creditor or a collections agency, take notes, put everything in writing if you dispute a bill, get the name of every person you speak to, don't give out your SSN, have them read it back to you or compare the last 4 digits only. Beware of ID theft and scams.
Ask the creditor for a "payment arrangements" letter to verify you are on a payment plan and give it to the apartment manager.

Answer 2

1500 is not really a lot, most middle aged Americans are 30-40k in debt. Pay it off yourself. I'm not too familiar with debt reduction agencies, but there's always catches. If they help you consolidate you're going to pay fees and interest and take longer to pay it off. Work your butt off, look for ways to cut expenses for awhile and give it all you got, cuz I know that interest is piling up on you! And don't even fall for those places who 'fix your credit'. They're all scams and they can't do something for you that you can't do for yourself legally.

As a 22 yr. old fully independent since 17, please listen when I say, having good credit is IMPORTANT! How embarrassing and inconvenient is it to not be able to get an apartment when you're grown, or being turned down when trying to buy a car. Are your parents willing to cosign for now? If not, try those apartment locators, they can help you find properties that allow bad credit. Either way you go will not be a quick fix.

Work hard at it, keep it up and you won't be sorry. Some of the benefits of having good credit for me include getting the best interest rates for everything, my credit card company waives all kinds of fees, they constantly increase my credit limit, and last year I bought 4 rental properties without proof of income! They just ran my credit! So now I'm using OPM- other people's money, to make money! I know you can tell I'm serious about this lol.

Answer 3

1500 is not a lot of money and does not constitute bad credit. The amount of debt does not generally reflect negatively on your credit score, as long as you are responsibly making your payments on time. Im 24 and I have alot more credit debt than that, but my credit is perfect and I never have had any problems finding an apt. Your best bet is to pay it off yourself at this point and keep it from getting any higher. Alot of credit agencies won't deal with an amount that low, and sometimes using those agencies actually reflect badly on your credit.

Answer 4

In the long run it is better to pay it off yourself. when you use a debt reduction agencie it should be your absolute last resort. when you pay on your own your credit report will start to reflect this within a few months. after about 6 months you will no longer be considered a bad credit risk, since you will be moved to paying deb catagory on your credit report, even if you still owe most of the money. when you use those debt management agencies you have to abide by thier rules and also it comes up on your credit that you have settled a debt, not paid in full. this stays with you for a few years and can limit your credit worthiness till its over.

Answer 5

Okay, there's a couple of things you need to know.

The first one is that there are a lot of bad debt reduction agencies out there, and a lot of people end up in a worse situation than they originally started in, so if you go with one of those, you have to be very careful. I was reading in one of the big news magazines recently that an agency went under and a lot of its clients ended up having to declare bankruptcy.

The second thing you need to know is that many agencies will only accept you if you have significantly more than $1500 in debt. The reason for that is that there is no real reason for creditors to work with you when you have small amounts owing here and there.

The third is that you can probably pretty easily pay it off yourself if you use some discipline and tighten up on your spending. Here's how you do it:

Make a list of everyone to whom you owe money, and include the entire amount you owe, the minimum monthly payments, and the interest rate they are charging you.

Start with the highest interest rate, even if it's one of the smaller amounts of money you owe. It seems silly, but trust me on this--the interest is where you are going to get creamed, so that's the one you want to pay off first.

Look at your spending habits, and see where you can save a little extra money. For instance, if you buy coffee and a muffin in the mornings, stop doing it. Invest in a commuter cup and brew your coffee at home, and buy muffins at the grocery store, and just take that with you. If you are in the habit of buying your lunch every day, start packing a lunch the night before, and eat that instead. Doing little things like that will help you save a few dollars here and there, and that money should be set aside for your debts.

Now, starting with the debt that has the highest interest rate, pay that every month, and pay as much OVER THE MINIMUM payment as you can. Sometimes it's only going to be $10, but other times it's going to be $50. Your goal is to pay that debt off first. In the meantime, keep paying the minimum payment on your other debts.

As soon as the debt with the highest interest rate is paid off, take the money you were paying to them, and start paying it to the company with the second highest interest rate. So now, you've eliminated the highest interest rate debt, and you are paying what you paid to them on top of the minimum payment to the next person in line. That will help you pay off that second debt quite quickly.

Continue doing that all the way down the line, until everyone is paid off. Once you have paid a couple of debts off completely, you will find that your payments to the next debt in your line is so large that you only have to make a few payments to pay it off. Your payments keep snowballing and growing with each debt you pay off completely, and pretty soon you are out of debt.

There are a couple of advantages to this system. One is that you pay the debt yourself and you learn to exercise some control of your money. Another is that you mend your credit score by paying everyone on time and paying everything off. The other big advantage is that once you are done, you find that you have some money each month that would have gone to paying debts but which now can go to savings for long term things like a car or house.

Another advantage is that in the long run, when you go to get a big loan for something like a mortgage or a car, you have a good credit history and no record of dealing with a credit agency. That stuff does show up indirectly on your credit report, and depending on the type of debt you have, it can hurt you in the long run.

So my advice is to tighten your belt, get out a pencil and paper, make a plan, and do it yourself. The benefits outweight the drawbacks.

Good luck.

Answer 6

Pay it yourself.
Debt reduction agencies look as bad on your credit report as any other bad debt
$25/week, it's gone in 14 months...

Answer 7

Pay it yourself
Using a credit counseling service or reduction agency to reduce debt is as bad as filing bankruptcy for your credit rating.

Answer 8

if it hasnt gone to collection agency yet, then pay it off, now... do you dispute ( not agree with) the amount of money your being charged? if your in dispute, then challenge the collection agency, or the place that billed you in the first place... you usually goto a debt reduction place when you have many many collection agencys, what the debt reduction place does is they go thru and challenge the debt, most times the collection agecnys will drop them...if they dont, the debt reduction place will talk to all your creditors, and combine them, then give you one low balence to pay all of them off... if youve only got one, dont goto debt reduction... you dont need it

Answer 9

$1500 debt is not alot, you should quickly pay it off right away. The interest on credit is very high I think. Soon you will find yourself owing much more.

Answer 10

Pay it yourself because the credit places probably charge a fee and you'll be paying more than the original debt.