As of today, Americans are carrying roughly $1.021 trillion in credit card debt. It’s risen by more than 7% over the course of 2017 — and is still rising!

Not exactly a record that we want to brag about, but it’s the harsh reality that this country must now face. Today’s quick guide on credit card debt relief programs is a surefire resource to help chip away at some of this debt and bring peace to the millions’ of Americans that are struggling to get out of debt.

The good news is; credit card debt relief programs can;

  1. Reduce balances down to a fraction of the total owed
  2. Eliminate interest rates
  3. Make debt affordable, even for those of you with a “financial hardship”
  4. Force creditors to either abide by federal laws or cease all collection activity
  5. Allow you to take back control of your finances
  6. Force debt collection companies to validate what they’re claiming you owe–before they’re allowed to continue to come after you, call you, and report negative items on your credit report
  7. Help you to become debt free faster (in half the time in some cases)

Some credit card relief programs can improve credit scores, while other debt relief options can lower your credit score. The following infographic highlights the benefits and downsides of each credit card relief program so that you can start on a path to safely get out of credit card debt for 2018.

 

How Credit Card Debt Relief Programs Work & Affect Credit Scores?

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How does a debt relief program affect your credit?

Debt relief programs can have a positive and negative effect on credit scores, depending on each individual’s circumstances.

 

Firstly; let’s look at how debt settlement programs affect credit:

If a person is behind on their monthly payments, their credit score has already been negatively affected. By using a debt settlement program they could get one of their debts paid off within 6-8 months, and at that point could see a small improvement in their credit score or in at least their debt to income ratio.

On the other side of the coin; if a person is current on monthly payments before entering into a debt settlement program, their credit score would gradually drop after entering into the debt relief program, due to the fact that they would need to fall behind on payments in order to use a debt settlement program. A debt settlement company begins negotiating with creditors after a debt has been “written off” and sold to a third-party debt collection company.

 

Secondly; let’s look at how debt validation programs affect credit:

Debts are not disputed on a debt validation program until they’re sold to a third-party debt collection company. After the debt gets transferred to the debt collection company, an entirely new set of laws kick in, such as the Fair Debt Collection Practices Act (FDCPA) — and these laws are often violated by the debt collection companies. And the FDCPA is only one out of many laws used in a debt validation program. (See additional debt validation laws here)

Debt validation does not deal with credit card accounts that are “current on monthly payments”– debt validation is only for third-party debt collection accounts. However, clients who are current on their monthly payments will still join a debt validation program because they cannot remain current on their payments due to loss of income and financial hardship. They know that eventually their debts will get sold to a debt collection company and they understand how the debt collection process works — so consumers proactively plan for the future in order to deal with their debt in the least expensive and most efficient manner.

The good news about debt validation is that once a debt is proven to be “legally uncollectible” the creditors can no longer report the debt to the credit reporting agencies (legally anyway). When a third-party debt collection account gets removed from a person’s credit, this can have a positive effect on credit scores.

(See debt validation example letter illustrating how the debt and the negative marks associated with it — can all be removed from credit)

Debt validation program - how it affects credit

 

 

Thirdly; let’s look at how a debt consolidation loan can be used to improve your credit score:

Since debt consolidation loans are used to pay off other existing debt–debt consolidation can improve your credit score. Initially, you could take a small negative hit on your credit score with debt consolidation due to the negative inquiry showing up on your credit report after applying for the loan and due to a “new debt” showing up on your credit after getting approved for the loan.

However, within a few months, your credit will illustrate an improvement in credit scores due to the “past debts” getting “paid in full”.

The longer a borrower has had an account, the more weight that account will carry. And therefore; you will see more of a positive effect on your credit score by paying off past due credit cards debts, compared to the small negative effect that you will see because of the initial “credit inquiry” and “the issuance of the new loan/debt” appearing on your credit report.

 

Fourthly; let’s look at how consumer credit counseling affects credit:

Consumer credit counseling has a neutral effect on credit scores.

Your credit score usually isn’t affected by consumer credit counseling, since you’re staying current on monthly payments, but it will show on your credit report that you joined a consumer credit counseling program and some lenders look down on this third-party notation.

 

Do credit card debt relief programs work?

Absolutely YES, these programs do work. Depending on what type of debt a person owes, their financial situation, their location and if they have a financial hardship — will determine what program is best for their situation. Debt relief programs don’t work if you are put in the wrong program. For example; client’s need to be able to afford their monthly payment. Or with a Discover credit card; Discover is likely to sue a person if they stop making monthly payments, so we wouldn’t put a client into a program that didn’t take that into consideration. 

Make sure to use a reputable company that has a proven track-record. Over the last 15 years at Golden Financial Services we’ve maintained zero customer complaints at the Better Business Bureau and an A+ rating. We are able to maintain this stellar track-record by making sure clients resolve their debt issues and get the best possible service. 

Call Toll-Free (866) 376-9846 to get a free consultation right now! 

What are the best credit card debt relief programs and how do they work?

Credit card debt consolidation is using a loan — preferably a low-interest loan — to pay off debt…

Credit card debt consolidation program – getting a low-interest loan to pay off your existing credit card debt. This type of loan can only be obtained if a person has a high credit score. Sometimes, bad credit debt consolidation loans are issued by third-party lenders, but the fees and interest rates that come along with these loans are astronomically high and often a ripoff. 

 

Credit card debt settlement programs can cut unsecured debt balances…

Credit card debt settlement program – if you are behind on monthly payments and your accounts are on the urge of being written off and sold to a debt collection company, or if your accounts were already sold to debt collection companies — debt settlement may be your best option to reduce the balances and get the debts paid off.

 

Consumer credit counseling programs can reduce interest rates…

Consumer credit counseling program – a negotiated interest rate is worked out with each of your creditors. A person is then responsible for making one monthly payment to the credit counseling company, and the company deals with paying their client’s creditors. The time it takes a person to become debt free can be shortened with a consumer credit counseling program, and payments may be slightly lowered. Also, if a person recently fell behind on their credit card payments, their accounts can be re-aged to show they are current.

 

Debt validation is used to fight a debt by disputing it with United States laws…

Debt validation programs – these programs challenge or dispute your debts; if a violation of a federal law has occurred, or if your account was sold to a third-party debt collection company. Often; at the time a debt goes from the original creditor and is transferred to a third-party debt collection company documents go missing, information becomes inaccurate and records can even be flawed, so if disputed and a debt collector cannot prove the validity of a debt with accurate information and complete records, at that point they must stop collection on the debt.

 

What is credit card debt forgiveness?

Credit card debt forgiveness is a viable option for 2017. However, don’t be deceived by its name; credit card debt forgiveness is a credit card debt settlement program. Settling a credit card debt for less than the full balance owed is what credit card debt forgiveness is referring to, which is the same as debt settlement.

 

Do federal credit card relief programs exist?

The bad news is that if you have credit card debt, there are no government programs available to assist you.

The good news is; debt consolidation for student loan debt is available through the government programs. Visit this page next to — see the (PROS and CONS) of each debt relief program available for 2017. 

 

Our IAPDA Certified Credit Card Debt Relief Counselors can simplify the debt relief process for you at 1(866)376-9846.