Sponsored Ad

Credit Repair and Debt Consolidation – How They Work Hand and Hand to Restore Your Credit Score

Author: | Posted in Credit Repair Tips No comments

Credit repair doesn’t just involve one solution, but a suite of solutions that work together to cause a deflated credit score to increase. One of the most effective credit repair tools is debt consolidation.

The term consolidation refers to the merging of two or more credit accounts to create one account. A consumer can use several methods to achieve this, and they can all be beneficial in raising the person’s score. The following is some information about repair and consolidation and how they work together for the good of your credit score.

Credit Score Repair Types

Credit profile and score repair is a suite of tools that specialists use to bring your score up to par. Some examples of credit profile repair are negotiation, debt settlement and debt management. Negotiation is the process of talking to creditors and trying to work out something feasible and reasonable. A settlement is an arrangement in which the creditor agrees to mark a debt as paid and settled for an amount of money that is less than the original balance is. A debt management plan is a type of consolidation that can that help a debtor immensely.

Consolidation Types

There are three types of debt consolidation moves that a person can make to repair his or her score. The first type of consolidation is a consolidation loan. A lender loans the debtor just enough money to cover all of the individual accounts that he or she has open. The debtor then only has to pay one entity each month, which is the consolidation loan lender. Such loans can help a consumer immensely because they often have interest rates that are much lower than the ones that they currently have on their debts. It can help the consumers from an organizational aspect, as well. They will be more likely to miss a payment because of something simple like forgetting the date. Another type of consolidation that one can do is a credit card debt consolidation.

This type of consolidation is debtor initiated and it may not be an officially recognized form of consolidation. It’s mostly for people who still have a credit card score that is high enough to qualify for a high-limit balance transfer card. What the person can’t do to consolidate debt is transfer all of the other balances to this one high-limit card. Doing so serves the same purpose as the other type of consolidations. It makes things neater, and in some cases, it decreases the amount of interest that the person has to pay.

The debt management plan is the third type of system that one may consider a consolidation. This is the most interactive type where a third party completes most of the processes that are involved. The debtor usually contacts a debt management plan and receives a counselor. The counselor examines the person’s program and then offers a solution to the problem. The solution with a debt management plan usually involves paying the counselor each month to handle the money and the correspondence.

How They Work Together

The way that consolidation and credit repair work to fix one’s credit score is this: The counselor comes up with a repayment plan that will make everyone happy. The debtor then has to stick to the plan to get the debt down within a certain amount of time. Consolidation plans usually last about five or six years, and they are a much better option than bankruptcy is for some people. Every time the debtor gives the counselor a lump sum of cash, he or she pays all of the creditors that the person owes. The creditors report the timely payments to the credit bureau, and the bureau reflects the payments on the person’s credit report. Over time, the consumer’s credit profile returns to what it used to be before devastation hit it. Timely payments can make a person’s credit score go up as much as three points each time that person makes a payment.

Who Can Work Them

Debt management specialists are usually the people who do all of the work like taking the money in, counseling and then making all of the necessary payments. Lawyers can help with situations like these, too. They can negotiate and hold a client’s money if he or she asks that person to.