Thursday, September 12, 2013

How To Work On Your Debt And Credit Score At The Same Time

People in debt have more than just their credit to worry about. In fact, it is never a good idea to just focus on paying off your debts. While it may be your primary concern, you must not lose sight of other things like saving and improving your credit score.

Do not think that everything ends when you get out of debt. That is just the end of one chapter and the beginning of another. What will you do when you achieve debt freedom? How can you pull yourself up?
Your credit score will help you achieve certain financial goals. For instance, you can get a good deal on your mortgage when you decide to buy your own home. It can even help you get better chances at securing a good paying job - in case you want to shift employers. Make sure that you do not lose sight of the life that you live right after debt.
Given that, it is probably a good idea to choose a debt relief program that will get you out of debt and at the same time, take care of your credit score. When that is your concern, there is probably nothing better than debt counseling.

Also known as credit counseling, this debt solution involves a debt professional known as a credit counselor. The credit counselor will help you analyze your debt situation and current financial standing. You will talk about how you can pay off your dues and they will educate you on the proper financial habits that could have prevented the debt situation.

If they see that you are qualified, they will offer to take a more active role in paying your debts through debt management. The service includes creating a debt management plan that stretches your debts over a long payment period so you can make lower monthly contributions. When this is presented to the creditor and they agree to it, you will make a single monthly payment towards the counselor who will distribute it to your different accounts.

So how does all of this help your credit score?

  • Credit counseling is not reflected in  your credit report. That means you will not feel its effect on your credit score.
  • The credit counselor will make sure you will make timely payments. This will keep you from late payment fees and a damaged payment history.
  • The creditor will freeze your credit card accounts and this will keep you from adding more into your debt.
The last two will actually help you improve your score as you follow your debt management plan.

All three will help consumers develop better personal financial habits when they go through credit counseling. Part of the session is to provide you with personal finance education and other training materials that will help you stay debt free. These also contribute to help you display better credit behavior.

At the end of the day, debt counseling will give you a well rounded experience that will not only help you pay off your debt, it will also teach you how to stay out of it. The fact that it can improve your credit score along the way is the icing on the cake.

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