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SolveYourProblem.com
Article Series: Debt Relief & Debt Consolidation
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Debt
Consolidation and
How it Impacts Your Credit Rating
Debt is not a high commodity. Across the universe,
people are not looking for a place to sign up for more debt.
In America, over 30 million consumers’ credit scores teeter
under the score of 620. Nonetheless, personal debt can be a
debilitating situation. Although, getting a forty percent job
raise job or winning the lottery are the ideal ways to solve
a person’s financial woes, there are other immediate solutions.
Since credit scores represent purchasing power, improving
one’s rating is critical. There is a direct correlation between
the interest rate a homebuyer and car buyer will pay. In other
words, a low credit rating represents a high interest rate
financing. On the contrary, a high credit score symbolizes
buying power. Particularly, for the person planning a significant
purchase like a home or new automobile – beefing up one’s credit
rating is a consumer smart strategy.
Over the years, debt consolidation loans have been the leading
way Americans have been able to quell their personal financial
challenges. Just as all financial institutions are not equal,
the same is true of debt service organizations. Nevertheless,
the right debt consolidation company can impact credit in a
positive way.
Fact: Since bills are immediately paid, a credit scores can
be raised via a debt consolidation loan.
Here are five steps to upgrade your credit rating and identify
whether debt consolidation is right for you:
Request a Copy of Your Credit Report
Before you opt for a debt consolidation firm, it is a good
idea to review your credit report. Since a credit score can
be tarnished by false information, it makes the best sense
to obtain a copy of your credit report. There are three reporting
agencies that will provide a complimentary credit report (Experian,
Equifax and Trans Union). Legally, Americans are entitled to
one complimentary or free credit report per year.
Fact: Payment history accounts for 35 percent of all credit
scores. A monthly late payment can reduce a credit score between
50 to 100 points.
Calculate the Total of Bills Owed to Your Monthly Income
Identifying how much you owe in your current monthly income
is the second way to determine whether a monthly budget versus
debt consolidation is necessary. If the total amounts of your
bills exceed fifty percent of your monthly salary, debt consolidation
offers a surefire way to rapidly raise your credit score.
Devise a Payment Plan
As financial institutions and credit card issuers report the
outstanding balance of consumer’s bills to credit bureaus,
the minimal amount paid does not help augment a credit rating.
As a result, it is best to pay off bills entirely.
It’s a perfect example of how using a debt consolidation firm
may immediately improve a consumer‘s rating.
Fact: Paying bills on a timely basis is the key way to raise
a credit score and rebuild a credit rating.
Pay-Off Bills
When financial and lending institutions evaluate and approve
credit, they prefer to see low debt balances on credit cards.
The wider the gap, the better the chance for gaining approval
of a low interest rate. (It is particularly important for the
consumer in dire need of raising their credit rating over 620).
Debt consolidation offers a quick remedy. Since debt consolidation
companies negotiate interest rates to be waived, a consumer
has the ability to pay their bills faster. Consequently, a
credit score can be augmented rapidly.
Credit score boosting strategy: Consumers can raise their
credit rating by charging less and paying the entire balance
each month.
Avoid Bankruptcy with a Debt Consolidation Loan
Bankruptcy is the antithesis of debt consolidation. As simple
as bankruptcy may seem, it can devastate any credit score.
Not to mention, the effects of bankruptcy last between ten
to 13 years. In recent news, the United States federal government
has revised legislation regarding bankruptcy. As a result,
filing bankruptcy carries many stringent requirements.
Fact: Bankruptcy will drastically lower a credit rating by
200 points or more.
On the other side of the personal finance spectrum, debt consolidation
loans feature a rapid means for getting out of debt. Since
all bills can be paid off – entirely, a credit rating can be
easily elevated. As buying power is impacted by credit worthiness,
consolidating debts via a loan is a smart way to beef up your
credit score.
© About-Personal-Loans.com.
All rights reserved.
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Holly Bentz is a finance writer and a contributor
to About Personal Loans.
About-Personal-Loans.com
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