Common Debt Relief Myths
by admin on May.07, 2011, under finance
If you’re having trouble paying your bills and are considering extreme measures, you’ve probably heard about debt relief. If you’re seeking credit card debt assistance, you should first research the truth about debt relief.
There are several common misconceptions regarding debt relief:
- Only homeowners can qualify for debt relief.
There is no loan involved for a debt relief program, so it has nothing to do with your ability to put up collateral. Homeownership is not a factor in debt relief.
- Debt relief is a debt consolidation process, and will result in lower interest payments.
People that believe this are confusing the services of a credit counseling agency with debt relief. Debt relief involves a negotiation or settlement of your debt, which means the total amount you owe will be lower. A consolidation will simply lump your balances together, and will mean you’re still paying back the same amount as was originally owed.
- Debt relief has no impact on your credit score.
Your FICO credit score should not be impacted by debt relief programs, but lenders will still see your credit history and make assumptions based on the contents. You enrollment in a debt relief program is apparent on your credit report, and many lenders view the listing as negative as a Chapter 13 bankruptcy filing.
- Any lowering of credit score due to debt relief is permanent.
Nothing, not even a bankruptcy, will permanently ruin a person’s credit. While debt relief enrollment will be reflected in your credit report for seven years, you don’t have to wait that long for your credit score to start to recover. Paying your balances on time and paying extra whenever you can will help boost your score in the meantime. Additionally, limiting debt while you pay down your balances will bring your score up.
Credit card debt assistance is available, but do your homework before you enroll in a debt relief program. Keep in mind that debt relief will have a negative impact on your credit rating, but that negative impact is a temporary one. Responsible use of credit in the future will help you boost your credit score.