We have all been at some time or other pursued by bad debts. Though in most cases this would not be something that you will lose sleep about, such situations will have left a bad taste in your mouth.
Most people encounter debt problems during student days (read that as youth) when they are not yet fully conversant with the power of money and the negative effects of its mismanagement. Again, most people learn on their feet and after the first-time problems with their credit cards or hand-loans, which their parents will help settle, they start respecting money.
Some fail to learn the valuable lesson that the first debt problems teaches and consequently land into some major problems during their mid-adult life. You will observe that the most and worst debt problems happen around middle-age.
Why? Because at such time you – men and women both – are at a crossroads in life and are looking for something that will make you feel better. Instead, you end up with major debt problems.
When Debt Consolidation and Credit Repair Are Connected?
When there is no other way to pay your bills and come out of your debts burden. You will know you have major trouble with your debts when you will not be able to raise the credit you think you deserve on the terms you think you deserve. When you look for the reason for rejection, you will find that your outstanding debts are labeling you as a "bad investment" to creditors.
You have two choices here:
1. Stop looking for credit – because at this point of time, you will not get anyone who will trust you enough with their money
2. Pay back or consolidate your debts – if there is no other way you can pay for your debts, go for consolidation of debt. This will rid you of the pressure of unpaid bills. In the long run, it will also give you an avenue to improve your credit ratings, albeit a backhanded one.
The Downside of Debt Consolidation
It is true that your credit ratings will become worse before they become better once you adopt the debt consolidation route. This is because the creditors will see you as a person who is unable to manage his or her finances satisfactorily. However, do not doubt that debt consolidation is a positive move towards becoming debt free. Many people fear it because it initially brings down their credit score.
When you make the decision, think of the alternative you have. This step is best when all other alternatives have failed. Take this step as you would that of bankruptcy – only as a last resort, as initially (say for 6-12 months) it will set you back with the credit bureaus.
This method will take a little longer to give you positive readings with your credit score. Nevertheless, it is a good path to walk on, if the alternative is staying indebted and struggling to keep creditors off your back.
Once you have stabilized a little with your payments, you will be able to rebuild your credit score based upon the regularity of your payments and improving your income to debt ratio.
Engage with only reputable companies, such as those affiliated to BBB (Better Business Bureau) or ECRA (Ethical Credit Repair Alliance) so you will be assured of the best services without fear of exploitation. As you will come out of indebtedness, the credit repair agency will teach you through counseling sessions, how to manage your finances so such problems will not repeat in the future.