I have about $15,000 in credit card debt. I have not been charging on them and have been paying about one and half times the min. payment or what I can afford. I just cannot get the debt down. I have called and lowered the interest rate as low as they will let me (around 11-12%). I am not late and always make at least the min payment, would it be wise to do the debt consolidation or keep going the way I am? Also, would it affect my credit score negatively if I were to do a debt consolidation? Thanks!
first, let me tell you that you are not alone in this predicament, i get many questions about the same problem. keep in mind that any third party assistance with your debt is going to affect your credit one way or the other. if you are able to pay more than the minimums, then you should keep doing so. i know it can be frustrating to see your balance not reduce that quick, but you have to keep at it. if you have good credit, i would try to apply for 0% apr balance transfer credit cards. be careful though, many cards charge a onetime fee, you should do your research on these. you can also apply for a debt consolidation loan, that way you will have put a definite payment amount towards this debt and know for sure when you will be paying it off. you are also smart in not transacting on your credit cards, keep it up, do not fall for the temptation of using them, just leave them for emergencies.
about the second part of your question on affects on your credit; the answer to your question depends on what type of program you are referring to when you say "debt consolidation." this term is widely used, and misused, in the financial services world to mean several different debt relief options.
the most common, and probably the most accurate, usage refers to debt consolidation loans, wherein a consumer takes a single loan, usually secured by his home or other property, to pay off several other creditors. debt consolidation loans are designed to lower the overall interest rate on debts, and to allow the consumer to make a single monthly payment to one creditor instead of paying multiple creditors. debt consolidation loans do not generally have a negative impact on consumers' credit scores, as these loans do not increase in the amount of debt; they simply move it from one account to another. also, consumers can leave open a few of their older accounts to make sure that they still have plenty of positive payment history appearing on their reports. to read more about debt consolidation loans, you should visit the bills.com debt consolidation loan resources page.
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the second most common debt relief option called debt consolidation is consumer credit counseling. consumer credit counseling service (cccs) companies attempt to negotiate lower interest rates and monthly payments for consumers. if you enrolled in a cccs program, you would pay the cccs firm a single monthly payment, which would be dispersed to your creditors based on a pre-determined repayment schedule. as long as the cccs company pays your creditors on time each month, and the payment is large enough to cover the minimum payment, then a cccs plan should not hurt your fico score. however, some cccs programs do not make payments timely, or make payments that are too small, resulting in delinquencies on their member's credit reports.
in addition, very importantly, cccs is reported to the credit bureaus and many lenders look at credit counseling as if you had filed for chapter 13 bankruptcy. so, while your fico score will not be impacted, your credit profile is very negatively impacted.
if you are interested in enrolling with a cccs firm, you should discuss these issues in detail with the firm before making your final decision. to find out more about credit counseling, visit the bills.com web site.
debt settlement programs are also frequently called debt consolidation. these programs, in which you save money monthly to negotiate settlements rather than making monthly payments to your creditors, definitely do have a negative impact on your credit score. in the months that you are saving money to negotiate with your creditors, your accounts will be listed as delinquent on your credit reports. however, the benefit of these programs is that they can often result in significant reductions in the balance of your debt, sometimes reducing your debt to 40% of what you previously owed. many consumers find this benefit well worth the temporary negative impact on their credit scores. bills.com offers a wealth of information about debt settlement and other debt relief options, available online.
unfortunately, credit scoring is too complicated a calculation for a fico outsider like me to accurately estimate the effects of any of the different forms of debt consolidation i have described above on an individual's credit score. however, in my descriptions above i described the general effects of these three options, which i hope will help you in deciding the option that is best for you, and help you find. learn. save.