Maintaining a good credit score is one of the main concerns when people are trying to deal with their debts. Protecting your credit score would mean easier and faster transactions particularly in mortgages, loans, and credit cards and will be a major factor in whether you get approved or not and the amount of charges you might incur (in interest rate). This is the reason why choosing the right option for dealing with debts is important to avoid future financial restrictions and concerns.
There are three available options in dealing with debt: debt consolidation, debt settlement, and bankruptcy. Debt consolidation offers the chances of paying your creditors through one workable payment after all the debts are added together and computed to determine a fair monthly payment. It is a viable option only if you earn enough income to repay your debts; likewise your credit score will be greatly affected because debt consolidation will render you technically compliant to your obligations with your creditors and the negative record can stay with you for a very long time.
On the other hand, debt settlement offers the legal protection provided by bankruptcy without having to pay for all of your debts. You will be making a monthly payment (called a war chest) to a debt settlement company who will then send a proposal to your creditors stating you will are willing to pay for your debts but only with a lofty discount. Generally, creditors will be greatly against the idea, but may agree to the conditions hereafter. However, the danger of scam debt settlement companies is a serious risk and your credit score will still suffer significant impact because your records will show you paid your debts in less than the actual value. It will be treated as not paying your debts, which can significantly impact your credit score.
Many people choose to avoid bankruptcy because of the belief that it will be damaging their credit score, but according to the website of the Bradford Law Offices, PLLC, it may be a better option in many situations. Filing for either Chapter 7 or Chapter 13 bankruptcy will have the same effect to your credit score and they provide a better solution for those who already have lower credit scores. This is because you will have the chance of rebuilding your credit scores after the bankruptcy. It is important to note, though, that your bankruptcy will stay on your credit report for no less than 10 years, so it might be a factor that financial institutions will look into when extending your credit.read more