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Debt Relief – Insolvency – Bankruptcy Information » Debt Relief » if i enroll in the debt relief program will it effect my credit?

if i enroll in the debt relief program will it effect my credit?

a co worker is way over her head in debt and a finance company recently offered her the debt relief program and she was concerned as to whether or not it would effect her credit if she opted to enroll in the program.

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4 Responses to "if i enroll in the debt relief program will it effect my credit?"

  1. H3NN!NG says:
    It shows up on your credit report that accounts were consolidated. If she is successful in paying down her debts it will look good. If she consolidates and does not pay it will look worse! I think the consolidation programs are rip offs. The best way to do it, is to call up each account she has open, negotiate a lower interest rate, and ask them to take off some of the interest that has accrued. You would be surprised how willing they are to work with you. It worked with my boyfriend. Good luck to her, it sounds like she has a smart friend to help her, good 4 you!!
  2. Suly says:
    Yes it will. Your credit will take a negative impact on your credit. Any type of hardship assistance programs will affect your credit. But you have to see the over all picture. If you cant pay all of them separately and you are defaulting on all of them, then it would be best to take the hit from the debt relief than to take the hits from all your creditors. If you find a good company that will work quickly and effectively it will work out great for you. If you want to cut out the middle man just call each company yourself and you can make the same arrangements they can but you have to be able to juggle paying them all individually.
    I hope this is some good info for you, good luck!
  3. Heather says:
    Yes a debt relief program will affect your credit. Your co worker will probably make her financial situation worse than it already is if she enrolls in a debt relief program.

    The Claims
    Debt negotiation firms may claim they’re nonprofit. They also may claim that they can arrange for your unsecured debt — typically credit card debt — to be paid off for anywhere from 10 to 50 percent of the balance owed. For example, if you owe $10,000 on a credit card, a debt negotiation firm may claim it can arrange for you to pay it off with a lesser amount, say $4,000.
    The firms often pitch their services as an alternative to bankruptcy. They may claim that using their services will have little or no negative impact on your ability to get credit in the future, or that any negative information can be removed from your credit report when you complete their debt negotiation program. The firms usually tell you to stop making payments to your creditors, and instead, send payments to the debt negotiation company. The firm may promise to hold your funds in a special account and pay your creditors on your behalf.

    The Truth
    Just because a debt negotiation company describes itself as a “nonprofit” organization, there’s no guarantee that the services they offer are legitimate. There also is no guarantee that a creditor will accept partial payment of a legitimate debt. In fact, if you stop making payments on a credit card, late fees and interest usually are added to the debt each month. If you exceed your credit limit, additional fees and charges also can be added. This can cause your original debt to double or triple. What’s more, most debt negotiation companies charge consumers substantial fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee of a percentage of the money you’ve supposedly saved.
    While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide accurate information to the credit reporting agencies, including your failure to make monthly payments. That can result in a negative entry on your credit report. And in certain situations, creditors may have the right to sue you to recover the money you owe. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home. Finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income.

    It would be a better plan for your co worker to get credit counseling and work on paying off her debts.

  4. loanpro says:
    Yes. However; her credit scores are most likely very low anyway. So the last thing on her mind should be her credit score. She should be most concerned with eliminating the debt quickly.

    High debt balances are not healthy for credit scores. The good credit scores is what placed her in this stressful position to begin with. Good or bad credit doesn’t matter today…because the banks aren’t lending. If she can’t afford to keep up with her credit card payments then she certainly doesn’t need nor will she qualify to bite off anymore.

    With that being said, she should consult with a Debt Professional who can provide a free financial analysis to see what her options are at this point.

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