Take someone who has $30,000 in credit card debt and is still current with their monthly minimums. During the beginning of the settlement process the credit score will go down. Because in order to obtain a settlement the account must be in default, which will leave derogatory remarks for being late. But once the debt has been settled and shows that you no longer have outstanding balances your score will being to rebound. The reason being that 30% of your FICO score is comprised of your debt to credit limit ratio, once the debt is gone this percentage of your score will go up.

As for the negative remarks from falling behind in the beginning these are disputable. Most reputable credit repair agencies should be able to remove most if not all of these remarks. Besides even without credit repair after about two years those negative remarks diminish in value. The reason for this is that 35% of your credit score is your payment history. However your credit score is only based on the last two years of your credit history. So your credit score is really only a snapshot in time and is pretty much constantly changing.

There is no permanent damage done to the credit report from going through debt settlement, it is not made a public record like bankruptcy.

Now for someone who has the same amount of debt as above but is already fallen behind, then debt settlement will only improve the score. The damage was already done to the credit report in the first place, so once the settlements have been reached the score will only go up.

Most people who are struggling with the idea of joining debt settlement programs are still weighing out all options, usually between settlement, credit counseling, or bankruptcy. While they all have their respective pros and cons debt settlement will save the most money and time, other than bankruptcy

Tags: debt settlement services, debt negotiation services, consumer credit counseling, credit repair, debt negotiation

The first thing is the company hires to many counselors enrolling clients and does not hire enough client service employees to maintain the quality of service. These companies become whats called "top heavy" meaning they have to many clients and not enough employees to do the correct job. These sorts of operations usually hire around 30-40 counselors and maybe have only about 10-15 people in client services. That is a recipe for disaster.

The second problem is having counselors who do not go through the necessary motions to ensure a client is qualified for debt settlement. What qualifies a client? The types of debt. Many counselors will completely look over or briefly look over the clients debts to ensure they can do the job. Another qualifying factor is the income and budget. If a person ends up having to put out more than 20% of their income to repay their debt, debt settlement may not be the best option. Unless the person has not many other monthly bills. My point is all of these areas need to be gone into in full detail to make sure that debt settlement is the right option for this client to take.

Tags: debt settlement, debt negotiation, credit repair, credit card debt settlement, credit card debt

Tags: debt consolidation, debt negotiation, credit card debt settlement, credit card debt settlement, debt settlement programs

Tags: credit repair, consumer credit counseling, credit card debt settlement, debt settlement programs, credit card debt

Tags: debt settlement services, debt settlement programs, debt negotiation, debt consolidation, debt negotiation services

1. Understanding the Basics. What is Debt Settlement?

First, what is debt settlement? Debt settlement is the process in which a reduced amount of your balance is agreed upon to be paid, instead of paying back the entire amount. For the creditors to be willing to offer someone any kind of settlement the account must be in default, meaning if you are current right now you do have to fall behind if you are looking to reach a settlement agreement. Debt settlement is not about your creditors writing off your debt without you paying another penny. With debt settlement, you do have to pay a one-time lump sum and in exchange for this amount of money, your credit card company reports your debt as being paid in full.

So what is it you are going to have to pay back? This all depends on the amount of debt and your personal financial situation, meaning your income and budget. In most instances, the amount of a debt settlement is somewhere between 30 and 80 percent of the original amount of the debt.

If your debt is $3,000 you can expect to pay somewhere between $900 and $2,400 in a credit card debt settlement. That isn't, however, set in stone. In rare instances a settlement can be as little as 10 percent of the balance or as much as 85 percent.

2. Oh Wow Sounds Great! But Hold On

By now you might be thinking this sounds great. I mean, who in their right mind wouldn’t want to pay back a portion of what they owe? Unfortunately, it's not always as easy as some debt settlement companies make it out to be.
First off a debt settlement service cannot guarantee any results until after they have the settlement in writing from your creditors. In fact, some debtors don't even qualify for credit card debt settlement. If the debt analyst of the company you speak with doesn’t analyze your situation by reviewing your actual statements during the consultation to see if you qualify as a candidate and just promises you he/she can help you out and pressures you to sign up, then hang up.

A legitimate debt settlement service will be up front about the fact that they cannot guarantee what the results of the settlement will be, they won't be able to quote you any firm numbers until they have negotiated on your behalf. They can give you a pretty accurate estimation, based on previous settlement arrangements made with that creditor, but nothing is set in stone until after the negotiation has been made.

3. Your Credit Score

Debt settlement will effect your credit in some way. For people who are current initially this process will effect your credit negatively, however once you get to the point of actually settling your debts you will see your score go back up. That being said, if you have outstanding accounts in default with numerous late payments, debt settlement will actually help improve your credit score pretty much right from the beginning.

However you must understand your credit score is only a snapshot in time and will go back up. Fortunately, debt settlement is not made a record on your credit report, unlike credit counseling which is a record during the duration of the program and bankruptcy which is a public record for the rest of your life. Plus the inaccurate negative remarks you will receive on your credit report from settlement can be disputed and removed, which along with the fact your accounts now reflect a zero balance after the settlement will greatly increase your score. But, nevertheless more than likely you will experience a temporary reduction in your credit score.

4. This Does Require Money.

Before you get all excited about debt settlement, remember that the money has to come from somewhere. When you negotiate a credit card debt settlement, in most cases the credit card company is going to expect the amount you negotiate in full. However most settlement companies open some kind of a trust/escrow account for you to build up the necessary funds on a monthly basis in preparation for make the settlement.

While in most instances the amount that you will need to set aside each month will be lower than what you were paying the creditors to stay current, you really should make a point to save up as much money as possible as quickly as possible. You can save more money by getting the settlement wrapped up quickly. Once your account starts to go behind the creditors to tack on fees, and additional interest, so the longer it takes for you to arrange the settlement the more your bill will be. If a company tries to enroll you into a settlement program that is going to keep you in debt for longer than 3 years than do not do business with them, you really should look to have this all wrapped up within 2 years or less.

5. The Company’s Fee
When it comes to debt settlement services, you are going to pay a fee for the services they provide. Considering that most consumers can't negotiate a debt settlement, the fee will be well worth it. What you have to look at is the overall picture that you are going to be saving a large amount of money on what you owe.

That being said, if a debt settlement company asks you to send them the entire fee up front before they have actually settled your debt, don't fall for it. Unfortunately, there are some scams out there and when someone wants you to send them money without any guarantee on their part, it's usually a rip off. The company your dealing with should have at least a portion of their fee based on performance and savings after the account has been settled, thus ensuring that the person negotiating your accounts for you is always looking to get you the best possible deal.

While credit card debt settlement can be a bit time consuming, confusing and sometimes even stressful, it is a great alternative to bankruptcy. If you find yourself in the position of no longer being able to pay your bills, a credit card debt settlement may indeed be the solution you've been looking for. Settlement has been a savior for a lot of people and kept them from bankruptcy court. The big picture to look at with settlement is the fact that you are going to be saving yourself money, in most cases a pretty decent amount of money and you are going to get out of debt very quickly, especially when compared to how long it would take you to get out of debt with minimum payments and high interest.

Tags: credit card debt settlement, credit card debt, credit counseling, debt settlement services, credit repair

1. Bad Spending Habits and Impulse Buying

Impulse buying shows lack of self-control. People will simply see something in a store and charge it on their card, because they just can't wait to own whatever item it is they bought, regardless of whether they have the money for it then or not. Credit cards feed into impulse buying that is what the cards are there for to satisfy out need for instant gratification. You know there is a saying "patience is a virtue" if some people adopted that principle they would not be in so much debt.

Bad spending habits run along the same line as impulse buying. Some people just indulge way to much in life. For example someone might go to a restaurant and instead of getting a burger and fries for dinner, they get the 20oz porterhouse, the appetizer, the drink special, and the dessert special. And of course charge it on their credit card. Now I am not saying that to splurge every once in a while is bad, but for some people it is a everyday way of life.

My Advice: Next time you are at a store, any kind of store, and you are going to make a purchase with your credit card. Look down at the items you are about to purchase and think to myself "Do I really need these things?". If you find yourself buying something that is more of a want then a true need then simply put it back on the shelf, and promise yourself when you have "real money" not a plastic card, to return and purchase that item for yourself without using your card.

2. Having Too Many Credit Cards!

This is the next major contributor to people getting into debt problems. People simply just cannot refuse the credit card offers they receive. They get these cards in the mail saying your pre-approved and your line of credit is 5k. For some people this is too much to handle and they will accept every card and charge on them.

My advice: Just throw these offers away! You do not need them. Think of each one of these card offers you receive in the mail as a little financial time bomb waiting to explode. The only way to diffuse them is by throwing them right into the trash.

3. Cash Advances!

This is a very big factor in people racking up debt. It seems just all to convenient to go to the ATM and take out cash against your card. However this becomes addictive to people and becomes a huge reason why they accumulate so much debt.

My Advice: Do not use cash advances. This essentially is almost the same as just charging on your card, you are still going to be paying interest and racking up debt.

Tags: debt consolidation, credit card debt settlement, debt negotiation, credit card debt settlement, debt settlement services

But let's take a closer look at this scenario. First, this is known as “debt transformation” a method of moving debt from one place to another. All you did was transform your lower risk unsecured debts into higher risk secured debt. This is where the real problem occurs, because if you run into financial difficulties again they can foreclose on your house. Most people don’t seriously consider this when taking this approach.

They pay off their cards with the debt consolidation loan secured by their home and now have no balance on these cards, but still leave one open with the highest credit limit just in case. Using credit cards (plastic) for many people is subconscious addiction, credit card junkies, and they live in denial. Statistics have shown that after five years 80% of people who use this method end up with the same credit card debt problems and now a higher mortgage payment.

What happens next is you look over your shoulder only to discover a huge mountain of credit card debt behind you and wonder how you got there again. 95% of the time it started from just that single credit card you kept out just for emergencies. Soon the credit card companies view you as a high credit risk and increase your interest rate up to 28% or higher. Once the interest is increased your minimums double and possibly even triple your monthly minimum payment.

At this point you are stuck back in the thick of the unforgiving credit treadmill, however you have a second mortgage that must take priority over the credit card debt or you will lose your home. At this point you don’t have any equity to do it again and your debt to credit ratio is too high to get any type of loan, going bankrupt becomes the easiest way out of this mess.

I have spoke with thousands people over of the last 19 years who have done just what I just described. And every one of them said the same thing. They thought they were going to be able to handle it and did not foresee themselves ever getting back into credit card debt like that again.

Bottom line is "No Pain, No Gain.” What it boils down to is debt consolidation loans can sometimes be all too easy. And lets face facts getting out of debt is not an easy thing for most people. Any route you choose to get out of debt is going to require a sacrifice of some kind, and that sacrifice will make your stronger and teach you not to make the same mistake again. It's just like working out at the gym you need the pain in your muscles to know they are growing and it takes time and effort to get the great results you desire. However those people who take steroids get a quick fix end up losing in the end. So if you are going to use your home for a quick fix for a credit card debt problem you have to give up all cards, and not even keep one! The odds are stacked against you if you still keep one card you will end up back on the credit treadmill again.

For people who are considering this option they really should look into debt settlementfirst. Settlement is true debt reduction; you will save a tremendous amount of money and get out of debt a lot faster than any other form of debt relief. The scenario above happens way too often and the reason is many people think they won't get back into debt, but they never truly broke addictions of credit and eventually slip, with a lot more to lose on this fall.

Tags: consumer credit counseling, credit card debt settlement, debt negotiation services, debt settlement, credit counseling

We will start with the con's.

1. A temporary reduction in your credit score. No creditor will be willing to make a negotiation until you have fallen at least 2 to 3 months behind. So when you are falling behind your credit report will take a negative hit. However the negative remarks from debt settlement are correctable, a good credit repair agency can get those negatives removed.

2. Harrassment from collectors. As you can imagine you will recieve phone calls in an attempt to collect the debt. Depending on what company you use for debt settlement collection calls can be greatly reduced if not stopped. But you will recieve calls to some degree.

3. Potential of being sued. This is always a possibility, while it does not accure anywhere near as much as one might think it does happen. Again with a good company this process can be delayed so a settlement outside of court can be reached. Which when you are being sued they company usually knows that they will not collect the entire amount and the creditor is ususally very willing to make a settlement.

Now for the pro's.

1. The tremendous savings! You can realistically look to save between 40-50% of the amount of debt you owe. Not only will you save money off of you current balance, but you must take into consideration the amount of money you would be losing through minimum payments and high interest than debt settlement be the difference of tens of thousands of dollars.

2. Get out of debt quickly. Of all the debt relief methods settlement will put you on the fasted road to becoming debt free. You can be looking to get out of debt within 2 years or less. Which is a far cry away from how long it would take to be out of debt through minimum payments.

3. The longer term positive effect on your credit score. Many people looking into settlement have lower credit scores than they may think, even if they are current. Why? Because of your debt to credit-limit ratio, which accounts for 30% of your credit score. So once you start settling your debts out your score will increase.

I personally feel the pro's heavily outweigh the con's. Nothing is worse than losing hundreds if not thousands of dollars every month for possibly decades through minimum payments and high interest. Credit card debt is death to your finances. How in the world can you save or invest for the future when you are barely making ends meet each month to stay current with your credit card.

Tags: credit counseling, credit card debt settlement, debt settlement programs, consumer credit counseling, credit card debt settlement

Tags: debt settlement services, credit card debt settlement, credit card debt, debt negotiation, debt settlement