Is Debt Consolidation a good Idea ?
Date: Fri, 06/05/2009 - 00:15
In such critical time so many people are in debt and want to move out of it. One of my friend also has debt and she is in such critical situation. Though she has a good job but she can not save as much money because so much she has to pay to creditors. So debt consolidation is a better option for her?
Need Advice
If she can afford to pay off the entire debt, she can go for deb
If she can afford to pay off the entire debt, she can go for debt consolidation program where she needs to make a fix monthly payment to a debt consolidation company. The company will send the payments to the creditors for her. Under debt consolidation program, the debtor can pay off the debt within a period of 4 to 6 years. Moreover, debt consolidation does not adversely affect your credit score.
Now, if she is not in a position to pay off the debt in full, she can go for debt settlement, where she is required to pay back only 40 to 60% of the outstanding debt amount. Debt settlement will however adversely affect her score.
If someone uses a consumer credit counseling service for debt co
If someone uses a consumer credit counseling service for debt consolidation...It will MOST DEFINITELY negatively affect your credit report/scores!
Do Programs affect Score /Report or not?
I have read for 2 hours on all types of credit counseling and most say it does not affect score since it has a note on report and FICO does not look at notes. I can find just as many persons say it affects as those that say it does not. SO if I pay on time and my balances go down as expected the score should improve or stay the same. This should be an easy answer but no one can agree. thks
That's because people often confuse Debt Consolidation with Debt
That's because people often confuse Debt Consolidation with Debt Settlement. DS will thrash your score as bad (or worse) as Bankruptcy, depending on your credit situation.
Fair Isaac does not take a Credit Counseling into effect when they determine your score (see last item in the list). But it does affect it a little, because your accounts will be on Hold (you will not be able to use the cards while you are in the program) and part of the scoring method is available credit. What it really affects is prospective new creditor's attitudes toward your credit report (as it will state that you are in a Credit Counseling program). What they forget to mention is that when you are in a program to pay down your debts, getting new debt is the *last* thing you want to do.
Debt Consolidation (also known by the better named moniker Debt Management or Debt Negotiation) is one of the best methods to get out of debt, especially since it is agreed to and "Paid As Agreed" is an awesome mark to have!
