When getting out of debt is a top priority, you may come across several ways to accomplish this goal. Whether you choose to work with a debt relief company or do it yourself, choosing the method that is best for you depends on several factors, including whether or not your chosen form of debt repayment will hurt your credit. Because improving your credit situation is generally one of the major goals of debt relief, this is an important consideration.
Debt Management Program
Enrolling in a debt management program with a reputable agency that customizes a particular plan to your financial situation can provide you with debt relief without hurting your credit, according to the Bankrate website. These programs stipulate that you write them the check and they in turn make sure your creditors are paid. These programs usually span three to four years, according to the site, and may only limit your ability to get new credit accounts. However, it doesn't drag your score down in the least.
Debt Consolidation
According to Financial Web, debt consolidation does not negatively impact your credit, particularly since it appears that more than one account has been paid in full, despite the opening of a new account. In fact, debt consolidation can help to raise your credit score if you create a positive credit history over time. However, be careful not reduce the amount of debt you have to pay when consolidating your bills, since this can hurt your credit.
Methods That Hurt Your Credit
According to the "Consumer Reports" website, paying a settlement amount for less than what's owed will result in a hit on your credit. This is because creditors look at this as an irresponsible form of borrowing, since you bit off more than you could chew and then didn't make it right with the company from whom you received credit. Working with shady debt tell you to stop paying while they negotiate can hurt your credit too, because disreputable companies may sometimes take your money and fail to work with your creditors at all. Meanwhile, your score is hitting bottom because you aren't paying a penny.
Considerations
In the end, the best way to ensure that your chosen path to debt relief doesn't hurt your credit is to pay attention to what's going on. If you've contracted with a debt relief agency, check on them to make sure the job is being done properly. According to Bankrate.com, even if the debt relief company is at fault for paying a creditor late on your behalf, your credit will still take a hit for the late payment. Stay in communication with your debt relief company and your creditors, carefully monitor your credit report and get everything in writing from the debt relief company to ensure that your credit isn't on the decline.
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