Does consolidating debt via a debt consolidation loan affect your credit score? Definitely. But does it affect it negatively? That’s a more difficult question. Credit score calculations are very complex entities involving many factors, so it’s not a cut-and-dry issue as to how they are impacted by debt consolidation loans. Certain aspects of consolidating your debt will have a positive effect and other aspects will have a negative effect. What you are probably going to find is that your credit takes a hit in the short-term, but ends up improved over the long-term, assuming all debt payments are made in a timely fashion. At one time, creditors who dealt with loan consolidation companies would report a status of “third-party assistance” to the credit bureaus, which had a negative effect on your credit rating. Fortunately, creditors are more enlightened these days and debt consolidation is very common. Just th how to dispute credit report e act of consolidating your debt does not in itself do any damage to your credit rating. What does do some damage is the way the consolidation process works. When a consolidation company begins the process of negotiation with your creditors, your debt repayment may be suspended. This results in the possibility of late payments being reported to the credit bureaus. So for a while, possibly up to four to six months, you may have late payments recorded on your credit report, which will drive your credit score down. Even after your original creditors begin receiving payments from your credit consolidator, some creditors require three months of payments before they will make a positive report to the credit bureaus. Once everything is settled, the credit card companies will no longer report you as a delinquent account. However, it is important that your debt consolidator dictate this requirement to your creditors.
National Debt Relief ProgramDebt Settlement Legal LettersSample Letter 1(Creditor’s name), the Creditor/Creditor’s Representative and (debtor’s name), the Debtor agree to negotiate and settle the debt under the following terms and conditions.The Creditor and Debtor agree that the current outstanding debt is . Both parties agree that the Creditor will accept a cash payment of $_________ towards settlement of the debt in full. The Creditor agrees to compromise the debt under the condition that he’ll receive the payment by [date].If the Debtor fails to send in the amount agreed by , the Creditor shall immediately demand the payment of the original amount owed by the Debtor. (Creditor’s name) also declares that he is authorized to act as an agent of the Creditor’s company.This agreement for debt settlement shall be binding upon the Creditor, Debtor and their successors and assignees.Dated:Signature: (Creditor’s name),CreditorSignature(Debt credit repair or’s name),DebtorDebt Settlement Legal LettersSample Letter 2Your NameYour AddressYour Phone #Creditor’s NameDepartmentCreditor’s AddressDate Dear Creditor,Re: Account Number__________In response to my recent conversation with your customer service representative, I’d like to present a complete assessment of my financial situation.Unfortunately, I have a lot of debt and not enough funds to pay all my creditors. So, I’ll be able to negotiate and settle debt with a few creditors only. I have enclosed a copy of my financial statement with details of my monthly income and expenses. This will help you assess my financial situation and give you an idea as to why I have requested a debt settlement.The final debt amount that we agreed upon is $_________. As part of the settlement agreement, I request you to co-ordinate with the credit bureaus in order to remove negative entry (late payment, collections etc) on my account from the credit report.
