Even in flush economic times, many individuals still run into financial problems as a result of mismanaging their credit. In today’s economic climate, with both unemployment and foreclosures still running high, bad credit is a problem for more and more people. Poor credit can affect every aspect of your life. Not only can it prevent you from getting the house or car of your dreams, bad credit can raise your insurance premiums, make it difficult to secure a new checking account, and even prevent you from getting a job. Instead of bankruptcy, many people turn to debt consolidation programs in order to get their financial houses in order.
Debt consolidation companies work on a simple model. After counseling you and reviewing your financial situation, including both your income and your obligations, these companies contact your creditors on your behalf to make manageable payment arrangements. Each month, instead of paying each creditor directly, you pay your debt consolidation service, and they distribute the funds to your accounts as agreed.
Before meeting with a counselor or consolidation service, be sure to gather all of your relevant financial information in one place. Get bank statements, credit card statements, loan paperwork, and any past-due bills you may have. Do not forget about your car payments and mortgage payments. While these will not be included in the consolidation, your obligations will affect the amount you can reasonably be expected to repay each month.
For many people, these services can be a financial lifesaver, allowing them to pay off debt rapidly without spending every penny they have doing so. In addition, the ease of having only one payment and one due date to remember each month can greatly simplify people’s lives.
However, it is not without its downsides. Any credit accounts placed on a debt consolidation repayment plan will be permanently closed, meaning that even once they have been repaid, access to those lines of credit will be gone. At the same time, this can be construed as a positive, as removing your access to that credit prevents you from immediately getting back into debt as soon as you have caught yourself up.
Additionally, most services work by striking deals with creditors, and these settlements for less than the full amount due may appear on your credit report and negatively affect your credit score. It is still preferable to settle and close a credit account rather than allow it to go into collections, and as time goes by and you continue your repayment plan and remain current on any open lines of credit, your score will gradually improve again.
Consolidating bills is a wonderful alternative to the expense and trouble of filing for personal bankruptcy for many people. Searching online for reputable companies, asking for recommendations from friends, family, and coworkers, and even sometimes checking with your creditors themselves can turn up a number of services whose sole mission is to help you regain control of your finances.
You should not procrastinate when attempting to repair or rebuild your credit; the sooner you begin, the sooner you will begin to see real results and the sooner you can feel in control of your life again.