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Debt Relief – Insolvency – Bankruptcy Information » Debt Relief » Can debt relief services affect your credit if you use them to lower your interest rate?

Can debt relief services affect your credit if you use them to lower your interest rate?

I am planning to sign up for Care One debt relief services to help me consolidate my CC debt. Do you think this will actually work? will this affect my credit rating? Does anyone have an opinion about this company and their services. I was reading their blog and for the most part it sounds like it really works but I’m trying to search for more answers.

Thank you in advance for any suggestions or feedback.

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3 Responses to "Can debt relief services affect your credit if you use them to lower your interest rate?"

  1. CatDad says:
    CareOne offers two services: credit counseling and debt settlement. Being enrolled in a debt management program would cause your credit report to state “enrolled in debt management.” This does not specifically damage your credit rating but it would make it virtually impossible to qualify for new credit while you are enrolled in the program…but that’s the whole point of being enrolled in a debt management program to begin with…to stop using credit.

    CareOne also does does debt consolidation/debt settlement. Stay away from any “debt consolidation” company that promises to cut your debt and payments in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.

    Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.
    ——————
    If you want to enroll in a non profit debt management program then I would advise to use the real one….CCCS. Contact your local Red Cross for a referral to the local Consumer Credit Counseling Services (CCCS). They can negotiate reduced interest and payments. They will require you to stop using all credit and to cut up your cards. Your credit report will be updated to “enrolled in debt management.” This does not damage your credit, but it may make it difficult to obtain new credit while you are enrolled in their program….so don’t use this service if you anticipate applying for a new apartment, car loan or mortgage anytime soon, as you would might be denied while you’re enrolled in the CCCS debt management program…

    CCCS counselors will often tell people to not file for bankruptcy when they really should. If your debt is overwhelming relative to your income/assets and the reduced payments negotiated by CCCS simply will not work, then you should think about filing for Chapter 7 bankruptcy

  2. Amara says:
    I don’t know about this particular company, but debt relief services can possibly affect your credit score. Here’s why:

    When you sign up for a debt relief service, you are typically required to close your revolving credit accounts (i.e. credit cards). By doing so, you are reducing your available credit, but your debt remains the same. Part of your credit score is based on your balance to available credit ratio. So… let’s say you have a $3,000 balance on your credit cards and a $12,000 limit. Your balance to available credit ratio is 25%. If you close your credit cards, you now have $0 available credit, so your ratio is now more than 100%. Credit score drops in the process.

    But this is only a temporary problem. If you use the debt relief service to lower your interest rates, and in the process are able to pay off your accounts sooner, then you’re credit will eventually get better and you can in many cases re-open your credit accounts once you have completed the program.

  3. thebigemailstar says:
    I used a site DebtCharmer.co.uk to sort out my debts they were really professional

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