Consolidating to one
It won’t prevent you from getting credit in the future, but for a time some credit products will be unavailable to you and others will come at very steep prices.Also, not all debts can be discharged in a bankruptcy. Collection accounts fall off your credit report after seven years.Even if you fall in a low tax bracket, you could face a huge bill to the IRS.The debt settlement process involves hard-core, long term debt collection attempts by your creditors, and serious credit score damage that will last for many years.Doing so will help your credit score, because the amount of revolving debt you have is a significant factor in your credit score. Don’t use them while you pay down your debt consolidation loan.[Learn More: Easy Way to Improve Your Credit] Debt Management Plan A debt management plan is a formal plan to restructure and pay off your debt.
You’ve got several options when you make the decision to eliminate debt.While you’re in the program, you won’t be able to use your credit cards or open new ones.The plan is designed to get you out of debt in three to five years, after which all of your accounts should be reported as paid-as-agreed.If you’re financially drowning, of course you can declare bankruptcy.The problem is that bankruptcy is a serious derogatory mark on your credit.
Debt consolidation makes sense for people who want to make one payment each month instead of several, and for those who can lower the amount of interest they pay by taking the new loan.