Archives
Pages
Partner
How Badly Does Credit Card Debt Consolidation Hurt Credit Rating?
Many people that could benefit from consolidating their credit card debt choose not to do it because they are fearful that partaking in debt consolidation will negatively impact their overall credit rating.
Though it is true that debt consolidation will initially hurt your credit, it is important to remember that debt consolidation is not intended for people that are in a manageable amount of debt with high credit scores. The purpose of debt consolidation is to assist people that have found themselves with an unmanageable amount of debt to pay off their unsecured debts in a reasonable time frame.
Hector Milla Editor of the “Credit Card Debt Free” website — http://www.CreditCardDebtFree.org — pointed out;
“…If you are a struggling to pay your credit card bills and other unsecured debts you may want to seriously consider whether or not a debt consolidation company could assist you. Debt consolidation works by having a company contact your creditors on your behalf. The company will negotiate lower interest rates, reduced fees, and more favorable repayment terms than you currently have with your accounts. You then pay your debt consolidation company a monthly fee and they in turn pay your creditors each month…â€
The reason that debt consolidation can sometimes hurt your credit is because many creditors require you to close your account in order to partake in a debt consolidation plan. Having multiple closed accounts on your credit report can lower your credit score. However, your debt to income ratio will constantly get lower since you will be working on paying off your debts on a monthly basis.
“…Therefore, while it is true that using a debt consolidation service can initially negatively impact credit, that fact should be weighed against the positive long term outcome of ultimately overcoming your financial hurdles and paying off your unsecured debt as quickly as possible, therefore restoring your credit rating over the long haul…†added H. Milla.
Further information about trusted and reputable companies for credit card debt settlement by visiting; http://www.CreditCardDebtFree.org