Consumers are facing financial hardship such as the lost of a job, reduced salary, divorce, death or a medical emergency. During these times – loans, bills and credit cards can quickly pile up and destroy the consumer’s ability to repay their financial obligations. Needless to say, these obligations weigh heavily on the consumer.

So what is the consumer to do about this situation? Some of the solutions make sound simply, in a normal economic such as:

• Understand your credit report
• Recognize financial situations
• Borrow only what you need
• Pay all bills promptly and more than the required monthly minimum payment

The consumer needs to try to at least to rein in their spending and establish some type of budget to mean their monthly obligations. One way to reorganize their financial situation is to:

• Call their mortgage lender to discuss a loan modification – This will achieve lower monthly payments
• Order a credit report – The consumer needs to know their credit score and identify any errors.

If the above does not fit your current financial situation then the consumer needs to look for other alternatives. One of the other alternatives is a debt settlement program. This type of program is designed to assist those consumer’s who are having financial difficulty. The debt settlement company will start to negotiate with the lender on your behalf.

So call for a free consultant today with your debt settlement expert.

A good credit rating is important because it affects every major financial decision the consumer makes. The better your credit rating normally, the lower your interest rate on your mortgage or car loans because you are better credit risk than someone with a lower credit score. In other words, if you have a positive credit history, meaning you repay your loans on time then you have a good credit. If you have a bad credit history, which means you are late on payments you have bad credit.

The three major credit bureaus are: Equifax, Experian and TransUnion. These companies use a scoring system that rates your credit by giving it a numerical number. This numerical number is considered your score and can range from 300 to 850 depending upon the credit bureau. On average, the majority of consumers should have a score in the mid 700 range to be considered a good borrower. Anyone with a lower then 650 is considered to be a poor risk by lenders.

Having indicted that lower than 650 is a poor risk. Credit card companies continue to issue cards to these borrowers but the rate is much higher than a consumer with a higher credit score. So how does a consumer improve their score?

Here are a few ways to improve your score:

• Make a list of all bills and their due date
• Make a family budget
• Enroll in an automatic or direct payment program – in same cases, you can get a lower rate by using these programs
• Monitor your credit report quarterly for errors
• Consider credit counseling to get tips on how to improve your spending habits
• If divorced, close all joint accounts after divorce. Start to rebuild credit in your own name
• Take responsible for your spending habits

Some of the things the consumer needs to revisit are the following key ideas:

• Does my family have a financial plan for the future
• Am I borrowing wisely and paying back promptly?
• Have I identified, avoided and recovered from various financial pitfalls?
• Have a gotten a recent copy of my credit report and do I understand it?

Everyone at some point in time has applied for some type of credit, whether it be for a auto, boat, RV loan, a home mortgage or a credit card. The consumer has normally been approved for a loan based upon their ability to repay the loan, cash flow and their credit score.

The key to being a good credit risk is based upon the consumer’s credit score. This score is a numerical number assigned to the consumer based upon their credit history. This history is based upon number of opened and closed accounts, payment history, including late or missing payments and collection referral, original credit limit, current balances, etc. The higher your credit score is the better your ability to borrow at more favorable interest rates. The lower the score the consumer is charged a higher interest rate or decline altogether.

Basically, the consumer needs to obtain a copy of their credit report from one of the following three credit bureaus: Equifax, Experian or TransUnion. These companies’ reports will explain where the consumer stands when compared to other borrowers along with explaining their financial score.

The three major credit reporting services use a numerical range of between 300 to 800. According to John UYlzhelmer, president of consumer education at Credit.com, “A 700 used to be enough to nab the best rates, but now a consumer needs a FICO score of 750.” When the consumer decides to use a debt settlement company one of the issue discussed how this will affect the consumer’s credit score. In the past, the higher your FICO (credit score) score the better risk you are to lenders. This score has meant you might be able to get lower interest rates either on your secured or unsecured borrowings.

However, if the consumer is seeking out a debt settlement program their FICO score’s have already dropped. The drop in score has been caused by late payment, over limit or high balances. In fact, paying off a card and keeping it inactive will not necessary hurt your credit score nor will it help your credit score. Recent news articles have indicated that lenders are closing or reducing credit limits on inactive or low usage credit cards. This is also having a negative affect on the consumer’s credit score. So this means if you had good credit and are not facing a difficult financial situation, your credit score is dropping anyway.

The good news is as your debts are negotiated your credit score will begin to improve again. According to creditcards.com, the average household has about $10,679 in unsecured debt. By paying this debt down, is another key to lifting your score, making up 30 percent of the score.

Whether you use a debt settlement program or you try on your pay down your debt yourself. So either way the consumer’s credit score will be changed overtime

The consumer needs to explore a debt settlement program as an alternative. Debt settlement is a method by which a third party negotiates on behalf of the consumer to reduce and sometime cut in half their credit card debt. The consumer needs to understand how this program works and how it will affect their credit score.
What are the positives to this program:

• The consumer now has a plan to climb out of debt.
• The consumer has a timetable for getting out of debt.
• The consumers credit will improve overtime as the debt is negotiated.
• The consumer may not continue to face the harassing collection calls.
• The consumer feels better about trying to resolve their debt by not filing bankruptcy.

Every consumer worries about their credit score. This credit score is key for allowing the consumer to borrow whether to purchase a home, car or apply for a new credit card. So once the consumer starts on the debt settlement program, one of the key steps to helping you’re current score is to continue making all other payments on time, This means making your monthly mortgage, auto and equity line payments. It is important to continue meeting your secured debt obligations.

Contact Debt Free Partners today!