Talk to a debt counselor toll free:800-300-9550
Our Clients Rate Us Excellent
Based on 3234 reviewsTrustPilot Reviews
Debt consolidation loans can be a very good option for consumers who have a lot of debt. Certain debt consolidation loans can help consumers recast their debt under a new, lower interest rate, and reduce their payments. By rolling all of their debts into one loan, with one monthly payment, their repayment process becomes easier to manage. However, if you are struggling with your debt and have damaged your credit score because of it, you are probably concerned about your ability to qualify for a debt consolidation loan. Your concern is valid. Your credit score will play a key role in almost every loan you apply for; and, more importantly, it will play a role in the types and terms of loans for which you can qualify. If you are looking to consolidate your debt with a debt consolidation loan, there are few things to consider.
Know your numbersIt's important that you have a complete understanding of your credit picture before you embark on any attempt to consolidate your credit. Numerous ways exist to pull a safe, secure, and free credit report. By reviewing your credit report, you may find items that need attention before you start your loan search. There is no magical fix for your credit score. Rebuilding your credit after it has been damaged takes time and diligence. However, knowing where you stand will keep you from wasting your time applying to lenders who require higher scores. In addition, having a heads up as to what may be showing up on your credit report will help you address problems with a lender. If your credit score is in need of repair, remedial steps exist that you can take to help your credit score improve over time. When you request a credit report, you will receive the details of your credit score. In these details, you can find out what factors are holding you back. Your credit score consists of five key factors:
- Payment history: A record of whether or not you make your payments on time
- Credit utilization: Of the credit extended to you, the amount you are using
- Age of your credit accounts: Older is better
- Mix of credit accounts: Car loans, credit cards, mortgages, etc.
- Application history: How many times potential lenders have pulled your credit
1. Identity theftWhen someone steals your identity, the effects on your credit can be far-reaching. If someone opens accounts in your name, they can be especially difficult to remove. That's why many consumers subscribe to credit protection through companies that monitor their credit constantly and offer repair services if necessary. If you have been the victim of identity theft, you may need to hire an attorney or an identity restoration company for help in getting it resolved.
2. Reporting errorsThree entities contribute to and affect your credit history content and accuracy: the credit bureaus, the creditors, and the consumer. Sometimes, a creditor or a reporting agency makes an error and reports something on your credit that belongs to someone else, such as a collection account or a missed payment.
3. Re-aging of old debtsCreditors will sometimes sell your debt to a third-party collection agency. Collection accounts have a defined period of time they are supposed to remain on a credit report. However, when someone buys the debt; sometimes, the clock will start over.
4. Mixed up filesIt's possible that someone who has the same or a similar name to yours can get his or her credit report intertwined with yours. If you do find errors on your credit report, follow some guidelines to start the correction process. Credit reporting agencies will have a guide for you to follow, so read it and follow it to the letter. In addition, you will need to dispute the error with each credit reporting agency separately. Just because you are successful in resolving the problem with one agency does not mean it's all set across the board. If, however, you see several errors on the same account, the reporting agency will allow you to address all of them in one dispute. You can work on resolving issues and errors with your credit report on your own. If you do choose to hire someone, be sure it is a reputable entity. Start building a good credit history Once you have your credit report cleaned up, you should start to work on building a good clean history. It is never too late to start attending to your credit in the proper way. Opening new accounts may help improve your credit score if your payment history, credit utilization, and the mix of accounts have not been great in the past. New accounts give you a bit of a fresh slate that can help you rebuild your credit faster. If you are unable to obtain standard credit card accounts because of poor credit, then consider obtaining a secured credit card account. These accounts require that the borrower put up a deposit that is equal to the credit limit on the card. If you miss a payment, or you cease paying entirely, the bank can withdraw the funds to pay off the card. Although secured, these accounts can help you build your credit history. If your credit is in decent shape, there are other methods you can use to help build up your credit score. Utilize these methods in any way possible, as they can help expedite the process of improving your credit.
- Stop all new purchases on your credit cards and pay down your balances.
- Don't close any of your credit card accounts, even old ones. This can alter the credit utilization portion of your credit score and interfere with your efforts to build a long credit history.
- If you are looking to apply for a loan, do your rate shopping within 30-45 days. This applies to mortgage loans and car loans alike. Keeping it within a short window will generally lessen the impact of inquiries to your credit, as most credit models will group like inquiries together.
- Pay off any collection accounts, and then make sure they fall off your credit report.