Consolidate Credit Card Debt Information

When a person consolidate their credit card debts, why is it that it effects their credit? What does the consolidating agency write or report to a person's credit file evey month? Does the consolidating agency and credit report company communicate evey month about report negative information a person's financial situation?

***Thanks For Answering My Question***

If you're working with a consumer credit counseling service, it will usually state under the accounts that are being paid for through them, "account being managed by a credit counseling service".

Though it may stop someone from getting new credit, or extending old credit, it keeps payments up to date, which actually improves your credit score. The important thing to note is that the fact that you were with the service will fall off your credit file when you finish the program, and no one can tell you were in counseling unless you tell them.

2008-03-31 19:33:10 by Pinto B

To consolidate credit card bills, get a loan from someone to pay off the cards in one lump sum, or shuffle the debt to a low-interest credit card ...

I have about 5,000 on my credit card that I want to pay off. Someone mentioned that I should consolidate. I don't know what this means exactly. I was also wondering if it would hurt my credit score. Any information you have will be helpful. Thank you!

Consolidating means you take out a loan for the amount of ALL your debt and after that only have one payment.

If your only bill is one credit card, then the best thing you can do is start by calling the credit card company and see if you can negotiate a lower rate of interest. If you can't get a lower interest rate, you might consider applying for a loan with a lower interest rate or a different credit card with a lower rate, and transferring that debt to the new card. Whatever you do, you need to get that card paid off as soon as possible and at the lowest interest rate you can get.

Second, don't run up any more charges on it and third, pay MORE than the minimum monthly payment each month. On $5000 of debt on one credit card, depending on what interest rate you've got, it will take you 10 years to get it paid off if you're only paying the minimum monthly payment.

And last but not least and maybe one of the most important, may your payments on time. Late payments will destroy your credit score.

2007-02-20 07:17:16 by Heart

My best friend, just graduated from college and she is about to began paying her student loans back. She also has a considerable amount of credit card debt. Needless to say she cant afford it. The only advice I could offer her was to consolidate her school loans. But can she consolidate her credit card debit as well? If so, how does that work? What requirements does she need to meet? Any information you can give will help. Thanks.
Well, honestly she hasnt been the most responsible person in the world when it comes to getting credit cards. So maybe her not being able to get another one is a good thing.

yeah of course. But its the biggest legal scam going these days. You dont end up saving money, and your credit score goes down. The only benefit is that you pay 1 large bill rather then a few small ones.

2007-05-29 12:08:33 by MJMGrand

My sister has confided in me that she has maxed out her credit cards and is not able to make the full monthly minimum payments, but sends in a smaller payment and is now getting flooded with late fees and ever increasing interest rates. I am not sure how to help her. I don't know if she should look into consolidating credit card debt or if that even works? I know she has to be ready to make changes in her lifestyle for this to even work...and honestly I don't think she's ready to commit to a change. But I'm hoping someone can offer some advice that I can take to her and say "This is your best plan of action..." and hope that she does something with the information. At least I won't feel like I have done nothing to help her. Thanks!
She says the credit card companies won't help her. They are basically like Tough luck, make your payments. I have asked her to cut up her cards, but I'm almost 100% certain she has a little room on at least one of them that she will continue to use. And she continues to go out to eat. She's just a mess.

The Truth About Debt Consolidation

Myth: Debt consolidation saves interest, and you have one smaller payment.
Truth: Debt consolidation is dangerous because you treat only the symptom.

Debt consolidation is nothing more than a "con" because you think you've done something about the debt problem. The debt is still there, as are the habits that caused it - you just moved it! You can't borrow your way out of debt. You can't get out of a hole by digging out the bottom. True debt help is not quick or easy.

Larry Burkett, noted financial author, says debt is not the problem; it is the symptom. I feel debt is the symptom of overspending and undersaving. Our certified counselors will not recommend debt consolidation for a client. Why? Because debt consolidation doesn't work.

Debt Consolidation Statistics
A friend of mine works for a debt consolidation firm whose internal statistics estimate that 78% of the time, after someone consolidates his credit card debt, the debt grows back. Why? He still doesn't have a game plan to either pay cash or not buy at all. He also hasn't saved for "unexpected events" which will also become debt.

Debt consolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However, in almost every case we review, we find that the lower payment exists not because the rate is actually lower but because the term is extended. If you stay in debt longer, you get a lower payment, BUT if you stay in debt longer, you pay the lender more, which is why they are in the debt consolidation business.

Debt Consolidation Example
For example, let's say you have $30,000 in unsecured debt, including a 2-year loan for $10,000 at 12%, and a 4-year loan for $20,000 at 10%. Your monthly payment on the $10,000 loan is $517 and $583 on the $20,000 loan, for a total payment of $1,100 per month. The debt consolidation company tells you they have been able to lower your payment to $640 per month and your interest rate to 9% by negotiating with your creditors and rolling the loans together into one. Sounds great doesn't it? Who wouldn't want to pay $460 less per month in payments?

But they don't tell you that it will now take you 6 years to pay off the loan. This may not sound that bad to you at first unless you realize how much more you will actually pay in additional payments. You will now pay $46,080 to pay off the new loan vs. $40,392 for the original loans, even with the lower interest rate of 9%. This means you paid $5,688 more for the "lower payment". Not such a good deal after all. This example shows you why they are in the business - becuase they make money off of you.

The Real Way to Get Out of Debt
The answer is not the interest rate; the answer is a Total Money Makeover. The way you get out of debt is by changing your habits. You need to commit to getting on a written game plan and sticking to it. Get an extra job and start paying off the debt. Live on less than you make. It is not rocket science, but it is emotional, which is why most people need help getting through it from someone like Dave Ramsey. Don't try debt consolidation!

2007-01-26 06:47:01 by Stephanie

ok first off some background information, I am a 21 year old male, married with 1 child. My wife and I have about $7,000 in credit card debt(haha from falling victim to the ever popular "pre-approved" scam, not saying its not my fault). We make between $1800-$2000 a month in net income(don't worry this isn't permanent, we're both in college). Our house payment is $400 other utilities add up to about $200, then we have car notes that total $390 a month(we both had one before we got together). Then finally we pay about $240 a month on the minimum payments of our credit cards. Is there any way we can consolidate this credit card debt to where we can have them paid in say 2 years or so before we graduate college.

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2008-03-05 14:38:51 by jeffrey