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 Posted: Wed Jan 16, 2008 12:43 pm Subject: How does consolidation effect credit? |
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I have spoken with someone from American Credit Counselors about consolidating my debt and so far everything sounds good. However, I have been researching and found that creditors treat debt consolidation (not debt settlement)as bad as bankruptcy. Is this true? I've heard conflicting information and not sure which is correct. I read somewhere else that there is a somewhat negative notation made on your credit report when you are on a debt consolidation plan but it is removed once the debts are paid. So what happens when it is removed? Does your credit score look better?
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melissa_t_smith
Joined: 11 Jan 2008
Posts: 27
Debtcc Points: 1102
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| Posted: Thu Jan 17, 2008 11:28 am Subject: |
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Once you enter DC this will affect your credit, all your accounts will show you are in this program, and you won't be able to get any other credit or be able to use any of the credit cards enrolled in the program. Once everything is paid off, your accounts will reflect that and your credit score will improve, you will also be able to improve your score with time once you complete the program.
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jb2007
Joined: 01 May 2007
Posts: 146
Debtcc Points: 10
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| Posted: Thu Jan 17, 2008 8:40 pm Subject: |
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Some companies consider this a bad thing, but then some companies look at it as a positive thing. It shows that you knew you had a problem and that you acted to resolve the problem before it got too out of hand and that you didn't have to enter into a BK. But then to some it shows that you cannot handle your finances. My credit union reffers their members to a company and then when they complete the program they will get the good interest rate on a loan from them. So it does make a ding on your CR but it won't be there too long. As long as you don't do a debt settlement program. That can leave a big ding on your CR for up to 7 years.
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puddlejmpr
Debt Samaritan
Joined: 15 Dec 2006
Posts: 1325
Debtcc Points: 3334
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| Posted: Fri Jan 18, 2008 2:20 am Subject: |
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hi melissa! whether you are going in a for a debt consolidation or a debt settlement, the thing is you are trying to repay your debts and not running away from it by filing for bankruptcy. that in it self is highly commendable. and once you have paid all your debts, your credit report will also improve with time. not to worry!
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laurel188
Joined: 16 Jan 2008
Posts: 110
Debtcc Points: 2507
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| Posted: Sat Jan 19, 2008 10:48 pm Subject: |
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Melissa,
debt consolidation IS viewed as a bankruptcy with some lenders such as mortgage lenders and car loans. I know because I chose that path several years ago and I was unable to obtain financing on a vehicle that I desperately needed because mine had broken down for the last time. That is ONE REASON I suggest debt settlement to people exploring their options. There are many other benefits to Debt Settlement as well.
Monthly Payments:
Debt Settlement cuts your monthly payments 50% avg.
Debt Consolidation keeps payments the same or reduces them slightly.
Payoff of Debt:
Debt Settlement pays off debt in 24-36 months allowing you to re-establish bruised credit faster.
Debt Consolidation usually takes 60-72 months and when you are done with the program, the CCCS statement on credit report is removed.
Savings:
Debt Settlement pays your account off at 40-70% of what is owed saving thousands and eliminating interest, late fees, etc...
Debt Consolidation pays your full balance off with interest at a lower payment
Credit Reporting:
Debt Settlement shows as settled account and debt to income ratios improve and better your fico score.
Debt Consolidation shows consumer is in credit counseling and will fall off after program is completed 60-72 months later. In the meantime, you may not open any new credit, nor should you
These are some comparisons that will hopefully aid you in making your decision.
Good Luck and God Bless!
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sanbaugh
Joined: 19 Jan 2008
Posts: 21
Debtcc Points: 667
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