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Does Debt Management Assistance Hurt Your Credit?


Posted on July 16, 2010

 

Some people are consumed with debt and feel the walls quickly caving in. They feel they can not make it on their own and have no where else to turn. Many will make the mistake and totally give up. They will stop making any kind of payments and soon the debt collectors are incessantly calling with threats of legal action. When people get to the point of no return, it can be difficult to know what to do next. They must look outside themselves for financial help which can be a hard first-step to take.

What Are Debt Management and Credit Repair Services?
There are credit repair and debt management agencies that specialize in helping consumers better manage their debts. These services evaluate your debts, come up with a budget based on your income, and plan out the most reasonable way for an individual to become debt-free based on their income and other financial obligations.

The counselors will also work with you to directly handle your creditors. They will contact each on to negotiate a new repayment plan to eliminate all of your debts and in some cases, can even get your interest charges lowered and penalties stopped. Many creditors are willing to work with reputable debt management companies because they know they will at least get some steady payment on the debts owed. Otherwise, they risk never seeing a dime from the debtor. Each creditor will differ in what they can offer in the debt negotiations but generally the outcome is in favor of the debtor. Another bonus is that once a consumer is enrolled in a debt management plan, the collection agencies and creditors will stop calling and most legal action is thwarted. All these actions help you go through credit repair as well.

Is Debt Management Good for My Credit?
A lot of consumers fear that enrolling in a debt management plan will tank their credit. While it is true credit scores may initially drop during the first few months of enrollment, it is also true that credit scores can be improved once payments are made regularly per the agreements made. Credit repair only works if you keep your end of the deal. Enrollment by itself won’t affect anything.

The reality is if a consumer is seeking the assistance of a debt management plan their credit has already taken a big hit because of the outstanding debts. The situation can only improve if a consumer follows the advice of the debt management counselors by setting a budget and being more financially responsible in the future. As more debt is eliminated, the positive information will be reported back to the credit bureaus and subsequently your credit scores will start to improve. This is the most successful way to repair your credit.

No Shame in Help
There is certainly nothing to feel bad about when seeking out professional help with finances. However, it is important to note that any consumer can manage their own debts, make their own budgets, and negotiate a more reasonable repayment plan with creditors directly all on their own. While not all debt management programs charge for their services, some do. Consumers can skip the extra fees and take the reins of their own finances to eliminate debt. It does take time, persistence, follow-up commitment to pay off debts and learn to live a better financial life. Consumers who are struggling to find their way through debt may want to consider reaching out for help. It is the first step towards a debt-free life and the first step is the most important.

What Mistakes Can Be Fixed?

The number one rule of credit repair is that your can not expect overnight results. Regardless of the type of help you enlist to get debt-free, it will take effort and time to begin to heal bad credit mistakes. Time is definitely a required factor in credit repair so have the right kind of expectations whether you work on repairing your own credit or get help from a debt repair assistance agency.

The second rule of credit repair is you can not remove accurate information from your credit report overnight. When you review your consumer credit reports, you first need to focus on the accuracy of the information. Whatever data that has been reported incorrectly can be disputed with the credit reporting agencies and if proven as inaccurately will be removed. If a consumer or a debt assistance agency tries to dispute accurate facts, the credit reporting agencies will likely find out the reality during their own internal investigation.

It takes up to 30 days for a credit reporting agency to investigate a dispute. If the incorrect information is proven to be wrong, the item will be removed. This can take some time but typically incorrect data is erased quickly. If the creditor does not respond in a timely manner to the reporting agencies investigation, the credit report may be revised in the favor of the consumer.

How Long For Results?

No matter which credit improvement route you travel, you can not expect instant results. However, in conjunction with your credit repair efforts, it certainly will help speed up the process if you also focus on eliminating as much personal debts as you owe and by paying your current financial responsibilities on time. An experienced debt assistance agency will be able to work with you on a reasonable budget to make certain you are using your income effectively toward your debt relief and credit score improvement goals.

Bad credit marks will remain on your credit for a period of up to seven years. If a bankruptcy is involved, ten years must pass before bad information is removed by the credit reporting agencies. While you can continually improve your credit score and meet your financial obligations, lenders and creditors will still be able to review your history. A marked improvement of credit does show effort however and can help you prove yourself a credit-worthy person once again.

When Should I Get Help?

There is no right answer for that question and everybody’s situation will differ. But in general, it may be wise to seek out assistance with your debt problems as soon as you realize you are in over your head in financial problems. If that time has long passed, consider contacting debt help agencies now to get the ball rolling. There is never a ‘right’ time as some consumers don’t care much about debt collector calls or mounting debt totals. But the reality is, the sooner you can help yourself, the sooner you can repair your credit.

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