Debt consolidating counseling

Specifically, two-thirds carry less than ,500 in non-mortgage debt, and they use an average of 7% of their available credit on their credit cards.That means that paying off debt, whether you use a consolidation loan or just put every penny you can toward your debt, can often be helpful to consumer’s credit ratings in the long run.

At the same time, any new loan can cause a short-term dip to your credit scores — so don’t be surprised if that happens.

Debt Management Plans" data-reactid="16"Debt Management Plansdebt management plan (DMP) is somewhat different.

Your bank or credit union may also be willing to help you consolidate, and there are some online lenders that offer consolidation loans.

(Tip: Triple check to make sure you are dealing with a reputable site if you are shopping for a loan online.

Still, these programs are available regardless of credit scores, so if you are having trouble consolidating due to the fact that you are maxxed out on one or more of your credit cards, a DMP may be worth considering.

Effect on Your Credit: You will be required to close most, if not all, of your credit card accounts while on a DMP and that will affect your credit scores.

On the other hand, FICO ignores any notation that you are paying your debt through a counseling program when calculating your scores.

So it will affect your credit, but it may not be as bad as you fear." data-reactid="18"You will be required to close most, if not all, of your credit card accounts while on a DMP and that will affect your credit scores.

The biggest risk, though, is that it’s easy to run up new balances on the cards that have been paid off in the consolidation.

And that’s definitely not a good move for your credit or your bottom line. The goal is to pay off those balances to free up cash flow as well as to help build strong credit.

However, if you decide to go this route it is important to be very disciplined in your approach.

Tags: , ,