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Jennifersdebtquestion · Posted: Fri Mar 24, 2006 8:02 pm Subject: Effect on credit

What effect does debt consolidation have on your credit? Obviously, I don't have an ideal credit situation since I'm here asking this question, but here's my problem: I have a great deal of debt (about $32,000 between 3 credit cards and a student loan), but I'm never late on payments. It's just that I have ALL THIS DEBT, and making the minimum payments, I'll never get out. My credit rating actually isn't that bad; it's just my debt/income ratio that's bad. Is debt consolidation right for me? Will it make my credit score worse?

Posted: Fri Mar 24, 2006 10:17 pm Subject:

Hi Jennifer!! welcome to the forums! I definitely think that you should check into debt consolidation, get all the facts and see if its whats right for you. It will not hurt your credit by being in a debt consolidation program. It could actually help your score a little.

Posted: Sun Mar 26, 2006 5:53 pm Subject:

Jennifer, debt consolidation will not have a direct effect on your credit score. However, you will have to close your accounts, which could cause a temporary drop in your score. Here is what you must decide: If you have very high balances on your credit cards, it may already be hurting your score some. Plus, as you said, you are making minimum payments and getting no where, while you are paying the credit card companies thousands and thousands of dollars in interest. You have to do something, or you will never get out of debt. What if you have some kind of emergency, and have to use even more of your credit? Something like that could push you into bankruptcy. Therefore, a temporary drop in your score is probably well worth getting these debts paid off quickly. Plus, as you pay those balances down, you will most likely have a higher credit score than you had originally. Please understand, any temporary drop you will see in your score will be NOTHING like the effects of a bankruptcy or other negative marks on your score. Talk to a credit counselor to learn about and better weigh your options. I hope you find this helpful, and feel free to ask any questions you may have.

Posted: Mon Mar 27, 2006 8:15 am Subject:

so debt consolidation has a bad effect on credit score in the short run but a good effect in the long run? also how does payday loans effect your credit score? i have about 13 of them which are being consolidated through T&C

Posted: Mon Mar 27, 2006 8:58 am Subject:

fka, debt consolidation itself has no effect on your credit score. If you are consolidating credit cards and traditional signature loans that are reported to the credit bureau, you are usually required to close those accounts. Closing accounts can sometimes cause a drop in your score, depending on your situation. For most people, this is not an issue anyway because they are already behind and/or maxed out.

For you fka, you probably have nothing to worry about. Payday loans are usually not reported on your credit until you are behind anyway. Plus, payday loan accounts don't generally help you have a favorable credit history. I would think that there would be no drop in your score due to consolidating payday loans.

I hope I didn't scare anyone away from consolidation. It is a great option for paying off your debt, and really helps your credit in the long run. The long run is, after all, what is really important. If you don't consolidate because you are worried about your short-term credit, you run the risk of setting yourself up for failure, getting deeper in debt, and eventually having no option but bankruptcy.

Posted: Mon Mar 27, 2006 9:04 am Subject:

dmj210

thanks for the information. also what do you mean once i fall behind on paying payday loans? i wasnt actualy behind until last friday but that was when i signed up for consolidation with T&C and i sent my first payment to them.

Posted: Mon Mar 27, 2006 9:54 am Subject:

I do agree with the fact that debt consolidation has a good effect on your credit in the long run. If you consolidate your credit cards and other unsecured loans, you will be paying installments regularly. And credit scoring models put maximum stress on good payment habit. This way debt consolidation helps you to boost your score.

Besides, once the accounts are paid in full, your counselor will assist you to get it updated as paid or paid as agreed. This status is definitely good to your credit score.

It's true that the accounts are frozen temporarily. But it is good for the program you know. If you place an account under consolidation and keep accumulating more and more debts, you will never realize the benefits of debt consolidation and the program will be elongated unnecessarily. So this will bring benefits to you ultimately. And it will not hurt to much if you close an account holding or going to hold negative information.

Posted: Mon Mar 27, 2006 9:57 am Subject:

Not many things out there can hurt your credit score more than being behind on payments. 35% of your credit score is based on payment history. That is the biggest factor! So really, consolidation is a great idea.

~Mary

j.aupperle · Posted: Tue Mar 28, 2006 3:15 am Subject: Deliberate default

My credit is good, but the interest rates I am currently paying are incredibly high. I have been in contact with a company which makes bulk offers to liquidate credit card debt, which would result in a 50% savings for me on the entire debt, with no interest on the installed payments. The problem is, they can only accept me in the program if I am in default (which I am not). In this case, I would actually have to deliberate default on my debts. Is this really a good idea?

Posted: Tue Mar 28, 2006 6:48 am Subject:

I would highly recommend debt consolidation. For me it was a life savor and I know it has really helped others here on this board.

Posted: Tue Mar 28, 2006 8:24 am Subject:

Hi j.aupperle,

That is probably not a good idea, as far as your credit score is concerned. Since payment history is the most important factor in your credit score, it is a guarantee that your score will drop due to defaulting. You don't have to be in default to do debt consolidation. Sign up on the left of this screen and a counselor will give you a call.

~Mary

Posted: Tue Mar 28, 2006 9:51 am Subject:

You are absolutely right Mary, defaulting will hurt your score and once a negative entry gets into your report, it stays there for 7 years. Sign up with this site and discuss the issue with the counselor. I do not think any such criterion is there to qualify for debt consolidation. Registration is free here.

Posted: Wed Mar 29, 2006 8:42 am Subject:

once payday loans go into collections.. do they show up on your credit report?

Posted: Wed Mar 29, 2006 9:27 am Subject:

As of yet not one payday lender has hit the credit reports or teletrack. But I wouldn't put anything past them.

Posted: Wed Mar 29, 2006 10:10 am Subject:

Yes, payday lenders usually report your accounts to Teletrack. Visit this thread for more info-

http://www.debtconsolidationcare.com/forums/teletrack-report.html

Posted: Wed Mar 29, 2006 10:18 am Subject:

does what goes on your teletrack effect your credit in any way? or just effect your chances of getting a payday loan in the future? which i know i will never get again lol

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