Finance Guide

Credit score gets affected by every single credit transaction you do. Yes its right, even if you apply for credit card, personal loan, mortgage loan or try any debt instrument, your credit score gets affected. Even if you pay your installments or dues on right time then also your credit score gets affected. In short you can say that your credit rating gets updated with any kind of transaction you do, if you dont pay your dues on time then you get bad rating and if you pay as per schedule then you get positive rating.

Now, you might be wondering how debt consolidation or debt counseling can affect your credit score. Well it affects your credit score in two ways, If you have debt consolidation loan which allows you to pay your debts in full then it affects adversly and your credit rating improves whereas if your debt consolidation loan which does not allows you to pay your debts in full then your credit score is affected negatively.

Credit Score is very important factor as most financial instituitions use it to determine your loan application. If you have good credit score then you can get loans easily and also at very affordable interests rates, whereas if you have bad credit then you might need to pay more interest on your loan.

Credit card debt is a type of unsecured consumer debt. Credit card debt occurs when a consumer makes payment through credit card for buying or consuming services. The debt then accumulates with interests and other penalties such as “Late Fees” if consumer fails to pay off credit cards debt. Failure in paying credit card debt may result in sue by the credit card company.

The options to get out of credit card debt is to file bankruptcy and credit counseling. The option of filing bankrupty should be only used if the debt becomes challenging, this process can give consumer some time for debt management. However filing bankruptcy should be the last option for the consumer as it hurts the credit score over longer period of time.

Credit counseling is the another option if consumer doesn’t want to file bankruptcy. These services negotiates with the credit card company regarding debt and arranges an easy monthly payment plan as per finanacial situation of the consumer. After the agreement a consumer needs to pay monthly payments to credit counseling services and they distributes the payment to the credit card companies on behalf of consumer.