Can Credit Counseling Hurt Your Credit?

February 3rd, 2010 | Posted in Credit Card Debt

With the economy going through a slow period and more people than ever dealing with foreclosure, people have begun to seek debt help through other sources. Some of these sources will be kind to your credit and some will not. There are two primary types of debt reduction and counseling programs. The first is consumer credit counseling and the second is debt settlement. You do not have to own a home or be credit worthy to use either of these programs. These options are both designed for individuals who are experiencing financial difficulties and are looking for a way out.

Pay your debts yourself-many people think this is the only way and it can be done. This plan takes a lot of discipline and not everyone has that. You have to make a detailed list of who you owe, how much, your monthly minimum payment and your interest rate. You make minimum payments on all accounts except the one with the lowest balance. On this account you pay as much as you are able. Once it is paid off, you do the same thing again. You should be putting all extra money to the account you are currently paying off. This will work best if you cut back on your expenses and increase your income. This method will keep your credit in tact and will teach you good money management.

A credit counseling organization will help you take inventory of your outstanding unsecured debts and they will also help you get setup on a budget so that you have the money to pay those bills. More credit counseling agencies are also offering debt settlement as an option also. Unfortunately, not everyone is in the financial position to be able to pay back everything that they have outstanding on their credit cards.

Debt settlement-this is a program whereby a debt counselor negotiates a reduction on the balances of your debts. Your debts are reduced on average from 30-50% and as much as 85%. Debt settlement can save you a lot of money and can have you out of debt in 12-36 months, but this does not come without a price. It will have a negative impact on your credit. This is a good alternative to bankruptcy and works if you have debt over $10,000 and debt that is over 3 months past due.

Bankruptcy-this is an option that is reserved for when nothing else will work. It is not the free ride that it used to be and will be a reorganization of your debts. This can remain on your credit record for up to 10 years. You do have options for debt relief. It is just a matter of deciding which option is going to work best for your financial situation and discipline.

Looking to find the best deal on free credit card debt relief, then visit www.debtmanagement1.com to find the best advice on credit card debt counseling for you.