5 Little-Known Facts about Debt Relief

Debt relief can be packaged in many forms. There are a number of companies that can help you get your finances in order, no matter what shape you are in. There are a few little known facts about debt relief because it is not a topic that is commonly discussed.

1. You Are Not Alone

Many Americans have credit card debt, you are not alone. The average American household has at least $8000 in credit card debt. Do not feel overwhelmed because you can come back from all credit debt issues with time and persistence.

2. Debt Settlement Will Hurt

Debt settlement is an option that some people take to get out of credit card debt. This involves settling your account for less than it was worth. For example, if you owe $5000 in credit card debt, you might try to settle it for $3000. While this option may look attractive, it will hurt your credit score. This type of settlement works like a bankruptcy on your credit report. You receive the same amount of derogatory credit history because you are not paying off your debts.

3. Avoid Bankruptcy

Some people believe the myth that bankruptcy is not that bad. This is completely untrue. A bankruptcy will remain on your credit report for 10 years. Unless you do not need to buy anything big in the next 10 years, a bankruptcy will hurt you.

You will be required to pay a higher rate for most purchases and your general quality of life may suffer. Consider your purchases for the next 10 years or whether you intend to move. Also, consider your water, electric, gas and other household expenses because they may require large deposits if you file for bankruptcy. If you can avoid bankruptcy at all, do it.

4. No Credit Cards

When you enter a debt relief program, you will not be able to use your credit cards for the duration of the program. Some people think that they can just keep going at the rate they are going and just get help with their interest rates. Debt management programs are meant to manage the debt, not just put a bandage on it. For a period of about five years, you will be without credit cards.

5. Late Payments Are the Worst

Making late payments are the worst thing you could do to your credit score. Over a third of your credit score is determined from this one action. Therefore, if you cannot make the payments, debt relief can help your score. Many people are under the assumption that it will automatically be worse for them if they join a credit relief program. If you are consistently missing payments, a debt relief program will considerably help you in the long run.

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