By Dometri Quick
Debt consolidation? Debt settlement? Bankruptcy? They can all hurt your credit score, but which way is the best way to eliminate debt?
Consolidating debt with the wrong company
If you’re in a bind with debt, struggling to maintain a healthy credit score or just frustrated by the current state of your finances, there’s a good chance that you’re at-risk to fall victim to one of the many credit killers lurking the world today. Bad credit can be a real detriment to your life as it may disallow you from buying a new home, leasing a new car or even obtaining a new job. Maintaining good credit is something that’s so important for your future as you need it to succeed in most aspects of your life.
Unfortunately, when you’re attempting to eliminate debt from your life, there are some credit killing methods that may seem like they’re helping you, when in actuality, they’re simply hurting your overall credit score. One thing that could kill your credit is consolidating your debt with a dishonest debt consolidation company. A dishonest debt consolidation company will take your debt and try to consolidate it on the surface but without an effective plan moving forward, it may not allow you to make regular payments on your debt.
When this happens, not only do you run the risk of losing some credit points by consolidating, but you also may suffer because you’re not paying your creditors on time. This may cause you to discontinue consolidation and return to your creditors, which is one easy way to completely kill your credit.
Settling your debt without understanding the process
While investing in a dishonest debt consolidation company can be detrimental to your credit, that is not the only way to hurt your credit score. Debt settlement is another popular option amongst those looking to eliminate debt very quickly. It works by allowing a consumer to negotiate directly with a creditor in order to settle a debt.
Typically, the settlement costs significantly less than paying off the debt would. While this is effective if you use a tight negotiation process, you also need to be completely sure that you understand all the terms surrounding the settlement and speak with a financial advisor to make sure the terms suit your needs. You should not have to give up control of your credit score to settle your debt. And, if this becomes the case, you should consider other options when settling your debt.
Consolidation may not be quite as cost-effective if you can afford to settle for a lump sum payment, but if settlement will cost your credit score points, think again and make the best decision for you. The key to a successful debt settlement is everyone coming out feeling satisfied and not losing anything in the process. Be sure your settlement won’t kill your credit.
Declaring for bankruptcy? Think again
As far as debt elimination options go, bankruptcy should be your absolute last option. Why? Well, bankruptcy is the ultimate credit killer. It will remain on your credit report and will automatically destroy your credit history. While it is effective in helping those who have absolutely no other options, it’s also a method that some people try before they really have to.
Are you simply frustrated and not necessarily in dire straits when it comes to debt? Some folks opt for bankruptcy out of this frustration before they need to. Consider all your other options before you enter into a bankruptcy agreement. Not only will you be glad you did today, but you’ll be glad you still have your credit for years to come. Don’t kill your credit before you’ve tried everything else and made every effort to eliminate your debt the right way. Don’t fall victim to any of these credit killers.
About the Author: Dometri Quick is the development director at
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