How Can The Debt Consolidation Affect Your Credit Rating?

16 March of 2015

The credit rating of the debtors can be affected through the debt relief process like debt consolidation or debt settlement.  The credit score will decrease with the increase of the debt burden of the individual. The debt relief programs can therefore act on decreasing your debt. The ensures that the debt relief programs can be chosen according to the budget and the convenience of the individuals. The debtor’s personal financial needs are to be properly analyzed before choosing the suitable debt relief plans.

Subjective: As the debt relief programs are very subjective in nature, it is very tough to come up with exact numbers and statistics. When you communicate with the debt relief representative, you can be guided properly towards the suitable debt relief programs according to your financial needs. During the entry point, the credit score should be checked and the outcome at the final level can be calculated at the end. The financial assistance will surely affect the credit rating of the individual. The debt relief programs may include the consumer credit counseling which prevents bankruptcy and other debt reduction procedures.

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Improvement of Credit Score: Yes, your credit score can improve with time. The debt relief programs can make your outstanding bills and debts into a manageable structure. Not only the payment structure can decrease, the interest rates can also be reduced. With reduced amount of bills, the debtors will find it easy to pay off the debt within the specific period. Whether the debtors are paying the bills on time is one of the factors and includes 35% of the credit score. Therefore, when you are paying the manageable debts timely, you are sure to improve that 35% in your credit report.

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Positive Impact on the Score: When you have opted for the debt relief programs, gradually your debts will show zero balance. The paid off accounts can be exhibited in the reports and therefore the credit ratings can be improved. If you consider a debt consolidation loan, the credit report will show that loan as a new credit. This new credit can definitely boost up your credit score. For increasing the credit rating the monthly payments are always advised within the due date.

Considerations: For maintaining a high credit score, you should be fully committed by choosing the debt relief plans according to your budget so that the monthly payments can be done within the specified time. If you have a long relationship with an active account, you should keep it in open status, even if you have paid off the whole debt. Closing that account can have a negative effect on your credit score.

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Misconceptions: Many individuals have misconceptions that the debt relief programs can have a negative impact on your credit scoring. It is just helping you out from the crisis situation so that you can regain control over your finances. As far as the credit rating is concerned, it will not leave a bad effect if the due payments are paid on time.

Debt relief activities can be done with the help of debt consolidation companies where they are trying to consolidate your debts so that you can pay it off through lower interest rates. It will not totally eliminate your debts just as in bankruptcy cases, but will create a strategy so that you can regain the control over your finances. As multiple debts can be consolidated into a single payment with a lower interest rate, the debt burden becomes manageable by the debtors.


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