Evaluating Major Credit Card Debt Solutions |
By Jenna Collier on December 27, 2010
.jpg.aspx?width=75&height=75) When searching for solutions to your credit card debt, try to find an option that will help you get out of that debt while making the least negative impact on your credit score. Below are three major credit card debt solutions.
Do-it-yourself Debt Solutions
The key to solving credit card debt issues on your own is, first, taking a realistic look at your income vs. expenditures. If you’ve never taken a good look at your finances, this may seem to be a daunting task. However, neglecting your cash flows is how you got into debt, and the only way out is to pay closer attention. Look at line-by-line what exactly you are spending money on and which of these items can be deleted. Looking closely at your finances allows you to see which seemingly insignificant daily expenses add up to become big money drainers. This may allow you to begin to pay larger and larger monthly payments over a period of time until you are finally debt-free.
Also, keep a close eye on your credit score and contest any debts which you think may be inflated or incorrect. You are legally entitled to request documentation of any alleged debt, and mistakes do happen.
Debt Settlement and Credit Counseling
Debt settlement occurs when creditors agree to reduce your outstanding balance in exchange for the payment of a lump sum of money. This option is attractive if you have accumulated a sum of money that you may not be able to maintain for an extended period of time, but could use as an incentive for creditors to reduce your debt. You can use debt settlement yourself by calling your creditor’s customer services department or you can solicit the help of debt settlement agencies. Although they will charge you a fee, they may also protect you from being trapped by fine print details an inexperienced borrower may overlook. Try to find an agency that promises to pay at least most of the fee after a successful debt settlement has occurred to reduce unfair fees.
Credit counselors should be non-profit agencies who help you set up a personalized plan for repaying your debt, whether it be through debt settlement, debt consolidation, refinancing your home or bankruptcy. If your debt problems are too large to handle yourself, these agencies can be a useful, unbiased source of information.
Bankruptcy
Bankruptcy is a last resort option for getting rid of credit card debt. It should be used only when no other option will get you out of debt in time to keep your house, car, or other large assets.
While debt settlement and debt consolidation may also negatively affect your credit score, bankruptcy is by far the most damaging avenue for debt relief. That being said, bankruptcy laws were set up for the specific reason of protecting those in serious debt with no way out from losing everything.
With no fees or further impact on your credit score, do-it-yourself solutions are by far the best option to get out of credit card debt if possible. However, if your credit card debt issues are too much to handle on your own, don’t hesitate to ask for help. While some of these options may hurt your credit score, they may also help you live a more financially responsible life later. Remember, you can always raise your credit score over time with responsible spending and borrowing. |
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