Does Consolidating Bills Improve Your Credit Score?
There has been lots of news recently about consolidating bills hurting your credit score. There are few ways to look at this, but for most people using a consolidation company will significantly improve credit score.
Consolidating bills will hurt your credit score if you choose that route but don't need to. If you can afford to pay your debts without consolidation you will be best off, but for most people that isn't an option. There will always be a line on your credit report that states that you had to use a consolidation company to get you out of debt. With that on there, your score may never be as high as it could without it. Unfortunately, lots of people can't overcome their debt on their own. So you must weigh the consolidation assistance versus the blemish on your credit report. If you cannot overcome the debt while maintaining food in your family's mouths, consolidation assistance is probably the route to take.
Let's take a look at some of the factors to consider when determining if bill consolidation is the best route for you to take.
Can You Get Out of Debt on Your Own?
Before considering bill consolidation figure out how bad your situation actually is. Get a copy of your credit report so that you can see all of your outstanding debt in one place. With this, figure out how much you owe. That amount will probably be hard to swallow, but it's important to know what you're up against.
Armed with your total, grab a bill from each company to see what your payments are like. If you're only paying the interest, you're never going to tackle this on your own. With all of your information in front of you figure out how much money you can afford to spend per month. If you can start paying them down, get to work, consolidating bills may not be needed! If not, read on.
Negotiating With Creditors
Before consolidating bills, it's certainly possible to call up each of your creditors (or collection agencies) and explain your situation to them and see if there is anything they can do to reduce the amount that you owe them. Most creditors will be happy getting something from you rather than nothing at all, and almost all of them are much more willing to negotiate during this economic recession. Use that to your advantage.
Begin by explaining to them some sort of hardship that you've gone through recently that has prohibited you from making your payments. Obviously, don't lie to them, but don't be scared to make a situation seem harder on you than it actually was. Job loss, injury, and family issues work well as "financial hardships" to justify your case to the creditors.
After hearing your case, they will decide if it's possible to reduce your debt. Usually, the late fees and penalties are the first to be removed, but if you present a great case some of the built up interest can be waived as well and you can consider loans for consolidating bills.
Loans For Consolidating Bills
If your credit score is still intact, a popular method for consolidating bills is to go to the bank and take out a loan that will cover your debts, then pay the loan back. Do this after you've negotiated with all of your creditors get them as low as possible. If you can get a loan for consolidating bills, some of the creditors will be able to lower your debt even more if you pay them in a lump sum, rather than in installments.
When To Find A Debt Consolidating Company
If you can't get a loan for consolidating bills, or don't have the time to negotiate call a consolidation company. They will take care of consolidating bills for you.
The blemish on your credit score for using a consolidation company is insignificant if it is your best option for getting out of debt. Personally, I don't care about that small blemish if I don't have to worry about creditors and collectors anymore!
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