Thursday, September 22, 2011

Credit Solutions - What to do first?

Credit solutions can vary depending on your own personal credit situation.

The one that works for you may not have the same positive or negative effect on the next person who tries the same credit solution.  That’s why it’s very important to properly analyze your personal financial situation before deciding on which of these credit solutions is right for you.  If you choose to eliminate this important step in your journey to reestablish your financial footing,you could very well end up doing much more harm than good.

There are 5 main credit solutions that should be considered when making the right choice for your situation. 

Bankruptcy (which should always be your last choice is the most extreme and the damaging to your credit history),debt settlement,credit counseling,debt consolidation,and the do-it-yourself method. But just in case you forget do not attempt any of these methods without knowing exactly what you owe, who you owe, and what your current credit score is.

The best place to start is with your credit score.   You can request a credit report from all 3 of the major credit agencies.  By comparing your credit score from all 3 agencies you’ll get a better idea of the overall damage is as well as what has the most effect on your credit score.    The main key to any of the credit solutions is to educate the consumer first.  This helps insure that the consumer will not do any further damage to their credit while they’re attempting to help.   After you’ve been educated on some of the details of fixing and maintaining your credit score,you should immediately verify the accuracy of each and everything on your credit report.

Jumping the gun and choosing a option before checking the accuracy could mislead you into believe that you are better off or worse the you actually are.  Since each credit solutions depends on how bad your credit is,this could make all the difference.   If you’re confident that you’re ready to move on, you can begin making an educated decision and start executing it.
Which of these credit solutions is right for you?

  • Bankruptcy has the most negative and longest-lasting effect on your credit history.  Therefore you should only use it in the most extreme cases without any other options.  There are several types of bankruptcy however none of them are good.
  • Debt Settlement is the next option and leaves behind its own stains on your credit.  It’s designed to significantly reduce your unsecured debt,reduce monthly payments,and quickly get your debt paid off.
  • Debt consolidation is a good option but only if you have enough equity in your home to refinance and use that money to pay off your debt.  If don’t correctly one might even escape without doing long-term damage to your credit.
  • Credit counseling or debt management will lower your interest rates but won’t affect the amount you actually you owe. It however does not affect your credit negatively.

Although the do-it yourself option is not a viable option for everyone,anyone who can should.  Mainly because any of the other options requires you hiring someone to help you and this uses money you obviously don’t have.  The main ingredients needed are a solid game plan that includes a budget that reduces spending and redistributes that money to pay off debt.  It also must make sure that you pay all your bills on time from here on out.

You must choose the option that suits your personal situation the best.  These are all very good if use in the right scenario and all are better than simply doing nothing.  Over 25% of all Americans are in need of one of these credit solutions so don’t feel alone.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.

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