In the past I have talked about Debt Settlement as a “Debt Cure” for your credit card debt problems. And for some people it is. But before you decide on this course of action, be aware that using debt negotiation with your creditors to get a good settlement offer can result in your FICO credit score dropping a few hundred points.
If you are scared of ruining your credit to get out of debt, then maybe debt consolidation is better for you.
Take a look at what has happened to my credit score over the past 6-8 months since I started a do it yourself debt settlement program:
Above is my FICO credit score before I missed payments on my credit cards due to a severe financial hardship. And below is what my credit score looks like now after I have settled with 3 out of 4 creditors.
Debt settlement has ruined my credit score!
Are you worried about keeping your credit score high? Have you seen all the commercials about how you need to maintain a high credit score to keep your insurance rates low, your credit card rates low, and your chances of getting a job?
I’ve even posted some of those on this blog. And if you are not going through a sudden job loss or unexpected medical bill then you may not need a drastic debt solution as debt settlement. And debt consolidation may be all you need.
Now here’s something else I want to show you:
My credit card debt before debt settlement: $61,713.xx
And here is how much credit card debt I have now after settling with 3 creditors and getting a balance reduction with a 4th:
I settled $43,250 settled for $13,054 and reduced a 4th balance from $10,160 to $7778.
I kept one card out of the program which I needed to pay for living expenses and business expenses and this has a balance of around $8300.
I am still not out of my severe financial hardship but eliminating over $43,000 in credit card debt in 6 months will go a long way towards helping me recover.
That cuts my monthly expenses by over $860 a month based on the 2% balance monthly minimum payment.
Would an extra $860 a month help improve your financial situation?
And now that I have $43,000 less in credit card debt, I am able to work faster on rebuilding my credit score. I can start making my payments on time again.
My debt to income ratio is a lot lower now.
In a couple short years I will have a healthy credit score again and will qualify for a low rate mortgage loan or car loan or even a credit card.
Debt settlement is not for everyone. If you have a small amount of credit card debt then it is not worth ruining your credit score over.
Get help from friends and family, consolidate your debts, stop charging, read the Total Money Makeover, heck, read Debt Cures I and II, and get out of debt.
I am just sharing with you my experiences and hope this can help you decide on if do it yourself debt settlement is the choice for you.
Talk to you again soon.
If you have any feedback, comments, or experiences let me know in the comments box below.
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