Achieving Debt Relief While Protecting Your Credit Score
The term “credit score” is something that we hear quite a lot about – most of us without really knowing what it means and how it impacts our financial standing. A credit score is essentially a numerical assignment that denotes our finance health and viability as a credit risk. A credit score is tabulated based on the amount of debt that we carry as well as our history of on-time payments. Late payments, loan defaults, and bankruptcies significantly impact our credit score and can prevent us from obtaining financing. If we are able to receive financing under these circumstances we are often subject to high interest rates.
Those who have incurred significant debt and wish to find options for debt relief often wonder how such measures will impact their overall credit score. The fact is that the way in which our credit score is being affected by simply being in such substantial debt may be far worse than anything we may experience through debt relief. In fact, with a credit card consolidation procured through a personal or home equity loan our credit score is not negatively impacted at all and may actually be improved by the consolidation as it allows us to pay off multiple credit cards.
With a credit card consolidation procured through a debt relief agency, our credit score may or may not be impacted. A debt relief agency is able to provide a credit card consolidation by negotiating with creditors to lower or eliminate interest rates. The consumer is then obligated to pay one monthly payment directly to the debt relief agency; the debt relief agency, in turn, disperses the payment to the multiple credit cards and the process continues until the entire debt is eradicated. The consumer is not able, however, to incur any additional credit card debt during the time that they work with the debt relief agency, and it may appear on their credit report that they are working with such a financial group. However, once the debt is discharged and the relationship with the debt relief agency comes to an end, you will more than likely find that it did not affect your overall credit score. In fact, in the end, working with a debt relief agency may have actually saved your credit score.
