How to Get Rid of Credit Card Debt Without Hurting Your Credit Score

Credit card debt has become a serious financial issue for literally millions of people in the United States. If you find yourself mired in credit card debt, your credit may already be suffering and you may believe your only option is bankruptcy. However, there are debt solutions available that will actually help your credit score and will allow you to dig your way out of debt in a relatively short amount of time. So it is possible to get rid of credit card debt without hurting your credit score right? Read on for a few moments...

Debt Relief Options

There are numerous debt relief options available for people with credit card debt problems, some of them good and some of them not so good. Options include debt settlement, debt consolidation and bankruptcy.

Settlement

Debt settlement is a negotiation process with your creditors in which they agree to a payment agreement that provides you with relief from your debt to them. Debt settlement agreements are often comprised of a combination of elements, including elimination of accumulated fees, reduced or eliminated interest and reduced balance amounts. Payment of a debt settlement agreement can take the form of a single lump sum payment or a series of smaller payments. You only pay a fraction of what you owe.

Consolidation

Debt consolidation does not eliminate your credit card debt, but it can make paying off your debts more manageable. People are familiar with debt consolidation loans, but these loans are often expensive and can actually make your financial problems worse. If you have bad credit it will be hard to qualify for a low rate consolidation loan that will give you a smaller monthly payment. You can consolidate debt with a second mortgage or home equity loan but again you will need good credit to qualify.

Bankruptcy

Bankruptcy is probably the solution of last resort for most people. Bankruptcy laws have changed over the past several years and you will be required to pay at least a portion of your debts if you have income and fail the Chapter 7 means test. Bankruptcy can damage your credit for up to a decade, making it difficult for you to buy a home or car and substantially increasing the rates you pay for insurance. In some cases, a bankruptcy can prevent you from getting a job or automatically disqualify you from professional licenses, dramatically impacting your ability to support your family.

Affect on Credit Scores

The majority of people who are searching for financial solutions to their credit card debt are already having problems making payments. You may find yourself tearing your hair out every month, trying to keep track of multiple credit card payments and trying to find the money to pay just the minimum payment. This rules out using the traditional debt reduction methods such as the debt avalanche or debt snowball.

If you are faced with unemployment or other unforeseen events that have decreased your income substantially in the past few years, you are not alone. Unfortunately, missed payments, late payments and a high debt-to-income ratio can have a devastating effect on your credit score. If you have missed payments and maxed out credit cards you have done most of the damage already to your credit score.

Here is the ranking of debt reduction methods and their negative impact on your credit score from least impact to most impact:

Consolidation
Settlement
Bankruptcy

If you face the facts, using any debt relief program will make it difficult to get rid of credit card debt without hurting your credit score. On the bright side, consolidation and settlement allow you to rebuild your credit score after you paid off your debts. However, debt settlement can help you pay off your debts the quickest and save the most money. It takes 24 to 48 months for most people to complete a settlement program.

Although the impact on your credit score may be temporarily negative, you will quickly see improvement as you pay off your credit cards and your debt-to-income ratio improves.

DebtConsolidationUSA.com has helped more than 100,000 people find solutions to their financial problems. We match you with top recommended debt relief providers who can help you find real meaningful solutions to your debt issues and get out of debt without further damaging your credit score. We do not charge any up-front fees for our services and only match you with credit counseling agencies with qualified and experienced staff and a proven track record.

It is entirely possible to pay off your debts and improve your credit score in the process. If you are having difficulty making your monthly payments, consider contacting us at Debt Consolidation USA today. Let us help you find a way back to financial health and peace of mind.

Source: http://ezinearticles.com/7175396

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