Is it better to use a debt reduction program that can benefit your credit rating or does using a debt reduction program hurt your credit rating? If you are currently repaying your debts through a debt consolidation program or utilizing a debt management strategy, it will not hurt your credit rating at all.
However, if you find yourself paying too much for your debt or settling for less than what is owed, there may be a negative reflection in your score. A negative mark on your report indicates that you have more late payments and have more total debt than is necessary for you to pay off. A negative mark can also be a reflection of an existing collection account that you have not settled.
Debt Elimination Program
You should be aware that not all debt elimination programs will reflect negatively on your report. It is important to research your program so that you know if it can help you out of your financial troubles. Some debt reduction programs offer to eliminate your debt within a set period of time. This means that you would be paying down your debt at a faster rate. However, if you are already behind on the payments and you are still looking for ways to manage your debt then this may not benefit you as much as you think.
Some debt elimination programs will work with you to get a lower interest rate and you may be able to negotiate with them to have a lower payment than you would have otherwise paid. In most cases, however, these programs are only designed to help you in negotiating with the company you are making payments with. Once the payment period has ended and the debt has been repaid, your debt will remain the same amount, but it may be reflected in your report as having gone from current status to default.
Many people find that debt relief programs can help to reduce the interest rates they pay and even lower their monthly payments. For example, credit counseling companies have access to many different resources that can help them negotiate with creditors for a reduced interest rate on loans and credit cards. The best debt relief programs do not allow creditors to charge any fees or other hidden charges.
While a debt elimination program can make a big difference in how well you handle your debt, be aware that not all programs are created equal. It is important to evaluate which ones are right for you.