Skip to main content
index page

will a hardship program ruin my credit?

Submitted by on Thu, 08/20/2009 - 09:25
Posts: 202330
Credits:
[Donate]

We are over 75,000 in debt and going through a hardship but have not made a late payment in over 10 years. We can do a hardship program with the credit card companies but are wondering if it will trash our credit or is it better than settlement and/or management. We understand our credit is going to be ruined one way or the other but we're wondering if we should try the hardship programs or go for debt settlement. The debt settlement companies seem really shady, though. Can anyone shed some light? Thank you!


IMO the effect would depend upon how the creditor would report the account to the CBs. Further if the lenders close the accounts then those would appear as negative entries in your report.

However, you can enter into the hardship program when you're current on the payments but settlement on the other hand may require the accounts being charged-off before the settlement process begins, which would cause more damages to your report as those would stay on it for seven years.

Anyway, you need to weigh all your options before entering into a scheme. It'd all depend upon the present status of the accounts, debt amount and the like.

Quote:

The debt settlement companies seem really shady, though. Can anyone shed some light?


Not always you need a settlement company to do the job. Check out the 'do it yourself section' of this site. May be you can handle the affairs yourself.


Submitted by SC on Thu, 08/20/2009 - 22:15

SC

( Posts: 3937 | Credits: )


Definitely attempt a debt management program before things get out of hand. It does not affect your score because FICO doesn't take it into consideration. Its major affect is to make it tougher to get new credit, as your credit report is marked as being under a Credit Counseling program.

That said, be *very* careful. Even being one day late on a hardship program (be *early* with your payments) will cause them to drop you from the hardship program immediately, and they will likely raise your interest rates as high as possible - which will cause your payments to skyrocket and force you to default.


Submitted by Chrys Henderson on Thu, 08/20/2009 - 23:29

Chrys Henderson

( Posts: 2538 | Credits: )


I've looked at a few Debt programs, myself. A few of them (as you have put it, OP..) seem "shady." I would go with your 'gut feeling'............if you KNOW there is something wrong, I would back off..ya know? You may go MORE into to debt.


Submitted by sdchargers_63 on Fri, 08/21/2009 - 03:53

sdchargers_63

( Posts: 1798 | Credits: )


The only negative mark when you go into a hardship program with a credit card company is that they credit close your account while in the program. This is so you arent able to continue using the account. ( I work for Macys Credit Dept) Im in a hardship program with one of my cards and although my account status changed on my credit report it had no effect on my score. I am in a situation kinda like yours.....Im just 22 but have over 20,000 in credit card debt. I've never been late on a payment but just needed to be able to send a lump payment to a company and LOWER the interest. I have a great company called clearpoint financial solution. Google them. Its GREAT! There fee is only 20 a month and my credit score went up from 650 to 678 and this is only my 5th month. Im on a 4 year plan so I will be debt free by the time I turn 25!!! Yae!!!!


Lastly, with any debt management company its just VERY important you take responsibilty and follow up on EVERYTHIING. Be sure you have all your due dates around the same time so your payments arent late. Until all the proposales are negotiated and you see the min pay change on your statement YOU ARE RESPONSIBLE for making sure the min payments are met. For the first month or two I double paid because the due dates were still being adjusted and my statements didnt reflect the new amouunts so to avoid any problems I paid more and before the due dates. The Debt management co does there part but YOU HAVE TO DO YOUR PART AND BE RESPONSIBLE FOR YOUR OWN CREDIT for it to work. Hope this helps.


Submitted by on Sat, 08/22/2009 - 09:04

( Posts: 202330 | Credits: )


I've never been on a 'Hardship' program, with anything. However.........the advice that is being given seems pretty reasonable. (Thinking outloud here).. If you're trying to get OUT of debt, why WOULD you try and get 'MORE' credit? I know a few people who had to file BK. As soon as they filed, they starting applying for ALL kinds of things!! Doesn't that 'defeat the purpose' of BK!!??? I think this Forum can understand my point.


Submitted by sdchargers_63 on Sat, 08/22/2009 - 12:19

sdchargers_63

( Posts: 1798 | Credits: )


Thanks for the understanding, CH. :D I'm sure your mom learned her lesson.I know someone whose BK has been 'discharged' for a while now. However.....during the 'middle' of the BK, she received all kinds of CC offers..she took just about evrey one of them!! NOW...she owes alot of money on these CC's. She was talking about filing for BK again. Gosh...it just doesn't make any sense to me. ..I feel like she did all of that 'effort' for nothing..ya know?


Submitted by sdchargers_63 on Mon, 08/24/2009 - 03:47

sdchargers_63

( Posts: 1798 | Credits: )


Exactly! She didn't learn the lesson the first time because she didn't believe me when I told her she would get all kinds of credit offers, so when they started coming in (and they were $2000, $2500, even $5000 a pop) she got so excited that she accepted the offers (admittedly, she didn't believe that they would *actually* send them to her). It's probably not that simple anymore, but as we know here, the creditors have as much to blame for the current credit crisis as consumers anxious to consume more (which message we are bombarded with via every medium).

Much of the motivation for the bankruptcy "reforms" was for just precisely that reason. Many people were filing every 5 years like clockwork, and that is quite fiscally irresponsible. However, I feel the "reforms" went way too far in the opposite direction.


Submitted by Chrys Henderson on Mon, 08/24/2009 - 04:10

Chrys Henderson

( Posts: 2538 | Credits: )


I am not sure what to do. I really am not in a lot of det but my income has droopd. I am thinking of just going to see a lawyer. I do not whant to file for bankrups. I really do not even trust those credit conceling companys because a lot of them are in law suits. Who do you trust these days?? I have a daughter going to collage at the end of the moth and i am strugling big time on making all of my payments. I am a signal mom with one income and no othere help. What would you do???


Submitted by on Thu, 08/12/2010 - 08:42

( Posts: 202330 | Credits: )


moms - you've probably figured something out by now, but for the record and to address the original OP as well: You DO NOT NEED to ever go through a "debt settlement company". If you are late or are up to your eyeballs in debt with several companies (Citibank, Chase, Discover, HSBC, BoA, etc.), the BEST thing you can do is take care of the situation YOURSELF. Take the time to call each of the companies, explain you can no longer afford the monthly payments, and see what they'll offer. You may be surprised.

But sometimes dealing with your current debt situation takes some time and patience, and a bit of a hit to your credit score. Sometimes you may have to let your cards go 30, 60, or even 90 days late before the above companies are willing to negotiate. NEVER GO WITH A DEBT SETTLEMENT COMPANY. They wait until your cards are 180 days late and the debt is CHARGED OFF before making arrangements. This is extremely detrimental to your future credit, and the results those companies produce are near exactly to what you can do on your own after being only a few months late in payments.

For example, Chase offered me their 5 Year Hardship plan at 0% for the remaining balance at 60 Days late. Say I had $6000 on the card. That meant I had 60 months, at $100 a month to pay it off. Note, these MAY, or MAY NOT currently affect your credit score. The company will put a "Note" on your credit report saying something to the tune of "Payment Arrangement Made to Payoff Debt". These notes COULD affect your FICA score, but the results are much better than letting the debt go unpaid, get charged off, or dealt with via bankrupcy or settlement.

Settlements - where you agree to pay a percentage, usually 55% to 65% of the overall balance, in one go - will stay on your report for seven years. Not great, but also better than charge offs or bankrupcy. Plus, after about 2 years their affects are no longer greatly felt. After letting my Chase account go to 170 days late, Chase offered me a 50% settlement offer. I paid $5000 on a $10000 debt and it was over and done with. Citibank offered me a 85% settlement at 30 days, a 65% settlement at 60 days, and finally a 55% settlement at 120 days.

Your credit is going to take a hit no matter what do. The best advice is to avoid Charge Offs at all cost. If your debt is substantial, as mine was, settlements are usually the way to go. It'll take a couple years to repait everything, but think of it as a "get out of jail NOW card at Half Price." Hardship Programs can reduce your interest rate to 0%, but bear in mind your credit is going to be in something of a "purgatory" for the duration you are in the programs. For example, I settled my Chase account - at HALF of what I owed - instead of going into the program. That was two years ago and my credit has already started to rebound. If I went in the program, I'd still have three more years to go and my credit would still be in a "holding pattern".


Submitted by on Fri, 03/11/2011 - 12:42

( Posts: 202330 | Credits: )