Debt Consolidation?

Question

I was wondering how badly credit card consolidation will affect my credit score? Will it be hard to finance things afterwards if I do this?

I was wondering how badly credit card consolidation with a counseling service will affect my credit score? Will it be hard to finance things afterwards if I do this?

Answer 1

Some debt consolidators deliberately let your accounts default (if they haven't already) to put you into a position to negotiate settlements....This can wreak havoc on your credit score.

Answer 2

Debt consolidation can help, but you need to see if you can meet a few requirements!

First, will the consolidation loan help you by having a better fixed interest rate than you have now? Yes. Good! If not keep looking.

Second, are YOU willing and able to put these cards away in a safe or somewhere for safe keeping so you don't run them up again before the bill is paid off? That is the million dollar question, isn't it?

For more on credit repair knowledge and scoring, go to my website and read it all! I had to deal with ID theft and bankruptcy and I still got my score up from 486 to 730 in a little over a year, so this is something I know about!

You would benefit from the "how credit scoring works" section of my website too! I'll have to add Sgt Big Red's links to my next chapter too so look at them as well! Hi Sgt Big Red!

The bottom line here is consolidation can be a real benefit and not wreck your credit IF you can use good judgement and self control! All this really means is spend only what you can afford! Having credit does not increase your spending power. Good Luck!

Answer 3

Debt consolidation is a good method to make one payment, however, it will works against you as far as the credit score goes. If you're not planning to use your credit for awhile, this is not a bad way to go as long as you don't miss a payment. It may not be harder for you to finance things, but it will make your APR percentage much higher than before. They say that it's better (credit score again) to keep the accounts open, but if it's too much of a temptation, then close it.

Answer 4

The answer to your question depends on what type of program you are referring to when you say “debt consolidation.” This term is widely used, and misused, in the financial services world to mean several different debt relief options.

The most common, and probably the most accurate, usage refers to debt consolidation loans, wherein a consumer takes a single loan, usually secured by his home or other property, to pay off several other creditors. Debt consolidation loans are designed to lower the overall interest rate on debts, and to allow the consumer to make a single monthly payment to one creditor instead of paying multiple creditors. Debt consolidation loans do not generally have a negative impact on consumers’ credit scores, as these loans do not increase in the amount of debt; they simply move it from one account to another. Also, consumers can leave open a few of their older accounts to make sure that they still have plenty of positive payment history appearing on their reports. To read more about debt consolidation loans, you should visit the Bills.com Debt Consolidation Loan Resources page at http://www.bills.com/debt-consolidation-loan

Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs at:
https://www.bills.com/mortage/refinance

The second most common debt relief option called “debt consolidation” is consumer credit counseling. Consumer credit counseling service (CCCS) companies attempt to negotiate lower interest rates and monthly payments for consumers. If you enrolled in a CCCS program, you would pay the CCCS firm a single monthly payment, which would be dispersed to your creditors based on a pre-determined repayment schedule. As long as the CCCS company pays your creditors on time each month, and the payment is large enough to cover the minimum payment, then a CCCS plan should not hurt your FICO score. However, some CCCS programs do not make payments timely, or make payments which are too small, resulting in delinquencies on their members’ credit reports.

Also, very importantly, CCCS is reported to the credit bureaus and many lenders look at credit counseling as if you had filed for Chapter 13 Bankruptcy. So, while your FICO score will not be impacted, your credit profile is very negatively impacted.

If you are interested in enrolling with a CCCS firm, you should discuss these issues in detail with the firm before making your final decision. To find out more about Credit Counseling, visit the Bills.com website at http://www.bills.com/credit-counseling

Debt settlement programs are also frequently called “debt consolidation.” These programs, in which you save money monthly to negotiate settlements rather than making monthly payments to your creditors, definitely do have a negative impact on your credit score. In the months that you are saving money to negotiate with your creditors, your accounts will be listed as delinquent on your credit reports. However, the benefit of these programs is that they can often result in significant reductions in the balance of your debt, sometimes reducing your debt to 40% of what you previously owed. Many consumers find this benefit well worth the temporary negative impact on their credit scores. Bills.com offers a wealth of information about debt settlement and other debt relief options, available at http://www.bills.com/debt_relief

Answer 5

Here are some links to help you through this problem

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm#improve
Building a better credit report.

http://www.ftc.gov/gettingcredit/
What you need to know about your credit.

http://www.ftc.gov/bcp/conline/pubs/credit/crdright.shtm
Credit and your consumer rights.

Hope this helps.

Answer 6

It's a bad idea to shift credit card debt to another loan. Most folks end up running those credit cards right back up and are in worse shape.

Instead work on pay off that credit card debt. Make a strict budget. Eliminiate all the extras -- eating out, cell phone, premium cable and internet. Put every penny you can squeeze out of that budget on the highest interest rate credit card, while making minimum payments on the rest. When the highest interest rate card is paid off, move to the next till they are all paid in full.

You can also work on increasing your cash flow -- have a garage sale, collect alum cans, get a second job.

If you work at it, you can pay off all your credit card debt in 2 or 3 years. Plus you'll have a nice on time payment history which will improve your credit score.