Do the consolidators companies hurt your credit?
Maybe a little different then what you are looking for. But you can go online to all the credit bureaus sites, dispute ALL of the delinquent or chargeoff accounts on your credit. The original creditor has 30 days to respond ( you would be surprised how many don’t ) if they don’t it will be removed.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.
Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.
Be very leary of third party companies that promise credit repair or debt consolidation. Many will just take your money and trash your credit.
Clean it up yourself. Make a strict budget. Eliminate all the extras — cell phone, eating out, new clothes, etc. Put every penny you can squeeze out of that budget on the highest interest rate credit card, while making minimum payments on the rest. When the highest rate card is paid off, move to the next till they are all paid in full.
Find ways to make additional cash to throw at the debt. Have a garage sale, collect alum cans, get a second job.
If you work at it, you can pay off all the credit cards within 2 or 3 years. You’ll have a good credit history and will have new financial management skills.
Debt consolidation will hurt your credit. It is placed in your report when you enter a program – which indicates that you needed (or thought you needed) help.
If your not behind – just put yourself on a program and use the “debt snowball” to get out. Give yourself a timeline that gets things paid off as quickly as you can.
Just make a spread sheet with all of your balances. Make minimum payments on all but one card. Work to get that one paid off ASAP. When its paid off, work on the next one. Start with either the highest interest rate card, or the lowest balance card.
If you get offers for 0% on balance transfers, etc., transfer the balance. BUT, make sure you destroy the old card so your not tempted to use it. In fact, its a pretty good idea to just destroy the new card when you get it. You don’t want to end up in the same problem. One of the keys to getting out of debt is to not create more debt. Kind of makes sense, but many people overlook this step.
Good luck.
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January 2nd, 2010 at 4:57 am
Consolidators DEFINITELY hurt your credit.
Your best bet is to call EACH credit card company and do two things:
1: Ask if they can lower your interest rate – just tell them you’ve seen a lot of competitive offers and options recently and would like to know if they could offer you something better than they are currently. Keep track of each of your cards and what their interest rates are.
2: Find out if there’s a charge to transfer balances. What you want to do, ESPECIALLY if balance transfers are free, is move balances from higher interest cards to lower, which will allow you to pay off the debt faster.
ALSO, if you’re overpaying (paying more than the minimum) – FOCUS ALL OVERPAYMENTS TO YOUR HIGHEST INTEREST CARDS – that way, you’re getting rid of the problem faster by getting rid of the debt that, in the long run, will cost you the most.