Debt Counseling And Your Credit Score

Debt reduction and counseling-does it hurt your credit

? With the economy going through a slow period and more people than ever dealing with foreclosure, people have begun to seek debt help through other sources. Some of these sources will be kind to your credit and some will not.

There are two primary types of debt reduction and counseling programs. The first is consumer credit counseling and the second is debt settlement. You do not have to own a home or be credit worthy to use either of these programs. These options are both designed for individuals who are experiencing financial difficulties and are looking for a way out.

Debt settlement is a debt reduction program and what this means is through this program your credit card balances are reduced. Your creditor is making an agreement to settle for less than the total amount owed. With this being said, you can actually resolve your debt quite quickly with this method. But many creditors are not willing to make settlements unless they believe that is their only chance of seeing any money. This usually means that you have not made your payments for 3-6 months. Any time you are paying less than we you have charged and you haven't made payments in 3-6 months, this will definitely have a negative impact on your credit.

Debt settlement is a viable option if you have a lot of debt or if your debt is old and has not been paid on in more than 6 months. In this situation, bankruptcy may be a better option. Debt settlement will look better on your credit than bankruptcy, but it is something that should be entered into very carefully.

Consumer credit counseling is your second option and this is a form of debt consolidation that does not require a loan. You make one monthly payment to the credit counseling organization and they disburse it to your creditors. This debt relief option will work if you are not more than 3 months behind.

Credit counseling, in most cases will have little or no negative impact on your credit report. Some creditors will add a comment to your credit report stating the account is in credit counseling. At first you may see your credit score decrease, due to all your accounts being closed and the amount of your balances. But as your balances decrease over time, your credit score will increase.

As far as your credit score is concerned, credit counseling is friendlier than debt settlement. However, which debt relief option you choose, should depend on your overall financial situation. It is important that you choose a program that you can see through to the end. There is no benefit to choosing a program that you cannot complete. Take the time to evaluate which debt relief program best meets the needs of your financial situation.

by: Marjorie Salada

POST COMMENT

Bad Credit Payday Loans – Provide Instant Financial Relief Short term loans no credit check-To fulfill short-term needs of life Loans with no credit check-Right place to grab useful finance Bad Credit Payday Loans - Credit Option to People with Bad Credit Loans for bad credit – simple loan even with bad credit Rewards Credit Cards will No Longer Be Rewarding Unsecured Loans Bad Credit-Quick financial relief without any collateral demand Payday Loans No Credit Check –Get Loan Via This Scheme Without Credit Checking Easy Payday Loans for Bad credit-Avail funds without any hesitation Bad Credit Loans Loan In Canada Clarification Of Bad Credit Payday Loans Part Two Bad Credit Loans Loan In Canada Explanation Of Bad Credit Payday Loans Part Two Bad credit same day loans: Remarkable funding aid for urgency The Ways Debt Settlement Will Affect Your Credit