Debt Relief Blog and Resources

Collectively, around 43 million Americans have student loan debt. In fact, Americans owe around $1.3 trillion in student loans debt. For federal student loans, there are a variety of loan repayment, and debt relief plans-a lot more resources than with private student loans. However, people with private student loans can find debt relief with consolidation, refinancing, and forbearance or deferment. Debt Relief Options for Private Student Loans It is important to really understand one's private student loans, since lenders can be a bit harder to track down than with federal student loans. In general, private student loans cannot usually be consolidated with federal student loans. Additionally, lower interest rates that are available for federal student loans are not typically offered for private student loans. To get relief, one can try and negotiate with their bank. Sometimes lenders are willing to work with borrowers who are having trouble making payments. However, because private student loans are considered dischargeable, this could be tough to work out. Consolidation While more companies offer debt relief programs for federal student loans, there are private student loan debt relief options out there. As opposed to debt settlement, debt consolidation is a lot more common when it comes to student debt relief. The following companies have reputable private student loan consolidation programs: Cedar Education Lending Private Student Loan Consolidation Citizens One Education Refinance Loan Citizens Bank Education Refinance Loan Credible cuStudentloans.org cuGrad PrivateStudent Loan Consolidation Darien Rowayton Bank DEAL Consolidation Loan Independent Community Bankers of America NextStudent Private Loan SoFi Student Loan Refinancing Student Loan Network Private Loan Consolidation Wells Fargo Private Consolidation Loan Since these are private consolidation programs with interest rates from the lender (not the government), there may be additional fees. Forbearance Or Deferment Forbearance and deferment are options worth exploring. Interest will still accrue over the time period, but these could be helpful for people struggling financially. Refinancing One can also try refinancing to lower the interest rate. A good credit score, steady employment, and a decent debt-to-income ratio can make a beneficial difference when it comes to refinancing private student loans. With refinancing, one can choose a new lender with a new interest rate. Private or Federal Student Loans? When it comes down to it, federal student loans generally offer better borrower protection than private student loans. Most of the time with federal student loans, borrowers struggling to make payments can switch to an income-driven, or pay as you earn repayment plan. Federal loan borrowers can also apply for Public Service Loan Forgiveness. Federal loan types include direct subsidized loans, Perkins loans, direct unsubsidized loans, Grad PLUS plans, and Parent PLUS loans. As of now, there are no private student loan forgiveness options. Between the two, many recommend federal student loans over private student loans. Why? Because federal student loans are a lot more likely to have debt relief options, and better borrower protection.   Sources:http://www.finaid.org/loans/privateconsolidation.phtml/https://studentloanhero.com/student-loan-debt-statistics-2016/https://www.nerdwallet.com/blog/loans/student-loans/private-student-loan-forgiveness/https://studentloanhero.com/featured/looking-for-private-student-loan-forgiveness-heres-where-you-can-find-help/https://www.nerdwallet.com/blog/loans/student-loans-federal-vs-private-loans/

Your debt is overwhelming. You can no longer pay your bills and you are falling behind financially. Perhaps you receive weekly collection calls. You know there is no way for you to pay back your creditors, so you are seriously considering bankruptcy. However, before you start dialing an attorney, consider your other options, particularly debt settlement. What Is Bankruptcy? Bankruptcy is a legal procedure that reduces or eliminates debts. Eligible individuals receive court protection during the bankruptcy proceedings. Through the process, assets are either liquidated to pay off debts or the court creates a repayment plan to help the consumer pay off debts over time. There are two main types of consumer bankruptcy, Chapter 7 and 13. In 2016, approximately 62 percent of the 770,846 non-business bankruptcy filings were Chapter 7, making it the most popular type of filing. During Chapter 7 bankruptcy, your nonexempt assets are sold and used to pay creditors. After the process is complete, remaining qualified debts are discharged. Certain types of debt, such as tax and child support, are not applicable. On the other hand, during Chapter 13 bankruptcy the court works out a repayment plan, equal to the value of your nonexempt property. Once this is complete, remaining qualified debts are discharged. What Is Debt Settlement? Debt settlement is a very different process. A settlement company will analyze your debt and financial situation, often during a free consultation, and create a plan to help you get out of debt. Often, they will ask you to make monthly deposits into a designated savings account, rather than paying your creditors. The accumulating sum is used in the negotiation process. The debt settlement company negotiates with your creditors to settle your debt for a lower amount than you owe. Top 5 Things to Consider While deciding between bankruptcy and debt settlement, there are several important factors to consider. Both decisions have short-term negative consequences, but can be beneficial long term. Consider the following five things before you make your decision: Eligibility Credit Impact Resolution Time Cost Tax Consequences Eligibility The first critical factor is eligibility; not everyone qualifies for bankruptcy. Additionally, many debt settlement companies have minimum debt requirements. Before choosing your course of action, you need to determine if you qualify for either method. Bankruptcy: One important eligibility requirement for Chapter 7 bankruptcy is income. If your income is less than the median for your state and household size, you will likely qualify. In addition, your amount of disposable income is a large factor. If you have little income after taxes and necessary expenses, such as food, you may be eligible. Additionally, debt that exceeds half your income or would take over five years to pay off indicates that you are a good candidate for bankruptcy. Chapter 13 bankruptcy has different eligibility requirements. Your debt cannot exceed a certain amount, $394,725 for unsecured debts and $1,184,200 for secured debts. You also must have sufficient income to satisfy a repayment plan and be current on your federal income tax returns. Both types of bankruptcy have several additional strict requirements. If your debt was recently discharged in a prior bankruptcy case, dismissed from a case within the past 180 days, you have attempted to defraud your creditors, or you do not attend mandatory credit counseling, you will not qualify. Debt Settlement: Each debt settlement company establishes its own eligibility requirements. Most companies only work with unsecured debt. Additionally, few companies operate in all 50 states. You need to verify which companies service your state. Finally, most debt settlement companies have a minimum debt requirement. Many companies require $7,500 to $10,000 in debt. However there are some companies that require as little as $5,000. If you have less than $5,000, you should look seriously at other debt relief options, such as debt management plans or consolidation. Credit Impact Both bankruptcy and debt settlement will negatively impact your credit score and report. The severity and the length of the impact needs to be seriously considered. Your credit score affects your ability to apply for loans and may dissuade landlords from renting to you. It significantly impacts your interest rates on loans, credit cards, and mortgages. Moreover, if you apply for a job with security clearance or in a financial industry, your credit score may be an influential hiring factor. After either method, you may consider using a credit repair company to help monitor and improve your credit. Bankruptcy: Bankruptcy will greatly impact both your credit score and report. Your score could decrease by 160 to 220 points. Chapter 7 bankruptcy stays on your report for 10 years; however, your discharged debts are removed after seven years. On the other hand, Chapter 13 bankruptcy stays on your report for seven years. You pay off many of your debts over a three to five year period; these may remain on your report for longer than seven years. Debt Settlement: If your debts are settled for less than the full amount, your credit report may read "Settled" rather than "Paid in full". Additionally, part of the settlement process involves making payments to a designated savings account, rather than paying your creditors. These missed payments will decrease your score. If you are already late on your payments, the impact will be less severe; however, if you have a high score, the drop will be more dramatic. In either case, debt settlement is still less damaging to your credit than bankruptcy. Resolution Time Debt resolution is rarely a quick process. Compare the length of each option before making your final decision. Think about your future financials goals and how quickly you need your debt resolved. Bankruptcy: Bankruptcy can take a few months or years. Chapter 7 bankruptcy is the shortest option. It typically takes four to six months. In contrast, Chapter 13 bankruptcy takes between three and five years. Over these years, you make regular payments as outlined in your court-approved repayment plan. Debt Settlement: The settlement process varies greatly based on individual circumstances. Many companies, such as Accredited Debt Relief, aim to have their clients debt free in two to four years. However, speaking to a company about your specific situation will give you a more precise time estimate. Cost If you are considering these two options, then you are struggling with notable financial hardships. You want to choose the option that makes the most financial sense. Take time to calculate the cost and see which option is best for you. Bankruptcy: There are several costs associated with bankruptcy. Chapter 7 costs $335 in filing fees, and Chapter 13 costs $310. In addition, many people hire bankruptcy attorneys, with an average fee of $1,250. You do have the option to file without representation, called pro se. However, a study of 2014 Central District of California bankruptcy courts found that only 48.2 percent of pro se cases resulted in a bankruptcy discharge (released liability from debts) compared to 82.1 percent of attorney represented cases. Though legal representation offers a higher success rate, it dramatically increases costs. Finally, one of the conditions of bankruptcy is credit counseling. Depending on your income, this could range from $0 to $50. Debt Settlement: Companies typically charge a percent of your enrolled debt, though a few companies base fees on saved debt. Pacific Debt Inc. charges between 15 and 25 percent of total enrolled debt for their services, a typical fee for the industry. The range varies based on state and amount of debt. Be wary of companies that charge upfront fees. Tax Consequences Debt relief has surprising tax repercussions. Familiarize yourself with these consequences. You do not want to pay off your debt only to receive a hefty tax bill at the end of the year. Bankruptcy: Canceled debt, in both Chapter 7 and 13 bankruptcies is not included in your income. Unlike other forms of forgiven debt, this is not taxable. To report this exclusion, you will need to fill out line 1a on Form 982. Debt Settlement: When your debt is canceled, your creditor will report it to the IRS through Form 1099-C. The IRS views this forgiven debt as taxable income. Unless you can prove insolvency (your debts exceed your assets), you will be required to pay taxes on the forgiven amount. The Final Choice As you decide your course of action, be sure to consider the aforementioned factors. You first need to establish if you qualify for bankruptcy or debt settlement. Your credit score will be impacted less drastically with debt settlement. Also consider the time and cost. Chapter 13 and debt settlement will most likely take a few years, while Chapter 7 only lasts a few months. During Chapter 7, your assets will be liquidated. If you are interested in retaining your possessions, debt settlement or Chapter 13 may be better options. Finally, remember that debt settlement is often taxable; include this in your cost estimate as you weigh your options. If you decide to file for bankruptcy, be sure to find a reputable attorney. They can give you specific legal advice for your unique situation. If you decide to resolve your debts with a settlement company, compare top-rated companies. You can read reviews from real customers and compare companies at BestCompany.com.

The last thing you want your children to inherit is your unresolved debt. Unfortunately, unemployment, medical emergencies, and an unexpected recession can drain your savings and leave you with unpaid bills. The fate of your debt, after you die, largely depends on the type of debt, your state, and the overall nature of your estate. Solvent vs. Insolvent When a person dies, the deceased's total combined assets form an estate. Estates are either deemed solvent or insolvent. Solvent estates have enough money to pay off all debts and allow some inheritance for beneficiaries. Applicable assets go through a probate process. Debts are first paid off with money from the estate, then beneficiaries receive the remaining sum according to the estate plan, or law if no plan was created. On the other hand, an estate is declared insolvent when assets are insufficient to pay off all of the deceased's debts. In this case, the estate is used to pay off bills according to federal and state laws. Some creditors will be paid in full, some will receive partial payment, while other debts will remain unpaid. In most insolvency cases, heirs and remaining family members are not responsible for debt. Probate Exceptions Certain types of accounts are excluded from the probate process. Life insurance policies and retirement accounts are typically paid directly to the beneficiaries. In addition, certain bank accounts, like those set up as payable upon death, will also go directly to the designated beneficiary. However, if the beneficiary dies first, the accounts may be included in the estate. Inheritable Debt In several cases, children, spouses, or parents will be held responsible for outstanding debts. Cosigners: If you cosigned an account or a loan, you will be held fully responsible for the outstanding balance. Joint Accounts: Typically joint account holders are responsible for the remaining balance. Community Property: Several states have community property laws (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, while Alaska is an opt-in state). In these states, the remaining spouse is often responsible for the remaining debt. Specific Types of Debt Five of the most common types of debt are mortgage, credit card, student loan, medical, and tax debt. Each type of debt has specific rules that govern how it is handled after death. Mortgage: There are three standard outcomes for mortgages. The remaining spouse or heir can choose to take over the mortgage. The Garn-St. Germain Depository Institutions Act of 1982 prohibits lenders from demanding the immediate full payment of a mortgage, in many cases. A second option is foreclosure. The bank will sell the property and collect the remaining mortgage. Finally, the beneficiary can disclaim the property, and it will pass to the next beneficiary. Credit Card: The outcome of credit card debt largely depends on whose names were on the account. If the deceased was the sole account holder, the estate is entirely responsible for the debt. No one is liable for the amount not covered by the estate. If the account had a cosigner, he or she is responsible for outstanding debt. However, an authorized user is not responsible. In community property states, the surviving spouse could be required to pay the debt. Unless an heir cosigned a card, and in some community property cases, collection agencies cannot collect money from surviving relatives. Student Loan: There are two main types of student loans: private and federal. Federal loans are typically discharged upon the death of the borrower. This type of loan often requires confirmation of death through a death certificate. Private student loans are often collected from the estate first. However, they usually involve a cosigner, who may be required to pay the remaining balance. Additionally, in community property states, the surviving spouse may also be held liable for the loan amount. However, some private loan companies offer death forgiveness policies. Medical: Like other debts, there are several different outcomes for medical debts. Often they are paid from the estate. When the estate is insolvent, some states still require surviving spouses to pay part or all of the debt. Sometimes a spouse will sign a guarantee of payment ensuring that medicals bills will be paid even if the estate is insolvent. Finally, in community property states the surviving spouse is usually held responsible for medical bills. Tax: There are several different rules governing tax debt after death. The statue of limitations for federal taxes is ten years; ten years after the assessment date the IRS can no longer collect owed taxes. Prior to ten years the government can still collect taxes, even after death. Unpaid personal taxes are paid from the estate. However, if a tax return was filed jointly, the remaining spouse will still be responsible for the taxes, even if the estate is insolvent. Deal with Debt Now There are several solutions that you can use now to deal with your debt. One option is debt consolidation. You can get a free consultation and discuss your financial situation with a credit counselor. Companies, such as Consolidated Credit, will help you create a debt management plan and consolidate your debt into one, lower monthly payment. They negotiate with your creditors for lower rates. Through this process, you can eliminate your debt and help ease your family's financial burden after you are gone. BestCompany.com has ranked and reviewed top debt consolidation companies. Read real reviews and choose the one that best fits your needs here. Prepare for the Future Now is the best time to plan for your family's future. It is important to understand the laws that govern unpaid debt in your state, especially if you live in a community property state. In addition, you need to understand the nature of your accounts. Joint account holders and cosigners are often held responsible for debt. Discuss your financial situation with an attorney. Find out if any of your assets will go directly to your designated beneficiaries. Ask about probate laws in your state. Once you understand the laws, you can plan to leave your family in the best possible financial situation. For more information on what happens to debt after you die, check out SproutCents's article.

Debt is an ever increasing part of life in America. Most consumers carry some form of debt, whether it be credit card, mortgage, auto loan, or medical debt. How does your debt compare with the rest of America? If you find yourself struggling to pay your bills, debt settlement or consolidation may be a great option. BestCompany.com compares companies to help you determine which one will best meet your needs. Check out the top-ranked debt settlement companies such as Freedom Debt Relief, Pacific Debt, and Accredited Debt Relief. Also, compare the top-ranked debt consolidation companies such as Consolidated Credit, DebtGuru, and DebtWave Credit Counseling. Read real reviews and find the best debt resolution method to fit your needs.   Sources: https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2017Q1.pdf http://fortune.com/2017/02/19/america-debt-financial-crisis-bubble/ https://studentloanhero.com/average-credit-card-household-debt-statistics/

There are very specific circumstances under which you should consider debt consolidation: number of creditors and interest rates are just a few of those circumstances. With so many different debt relief options, it can be hard to know which solution is right for you and your needs. One available option is debt consolidation, which is the process of combining debt from multiple creditors into one lower monthly payment (often through a debt management plan or a personal loan). Debt consolidation is beneficial because it typically results in lower interest rates and lower monthly payments. Working with a debt consolidation company may help you take control of your debt. Take this quiz to find out if you are a good candidate for debt consolidation. How Does Debt Consolidation Affect My Credit Score? Debt consolidation doesn't affect your credit score nearly as much as debt settlement or bankruptcy. Though extremely effective, both debt settlement and bankruptcy will greatly reduce your credit score, making it nearly impossible to make future large purchases for the following few years.  Debt consolidation is more suited to those who aren't yet being hassled by creditors, though there are exceptions. Because you are seeking to pay your debts instead of seeking a settlement, you are protecting your credit score.  You can actually build your credit score through a debt consolidation loan if you make the payments on time. A debt consolidation loan will replace the entirety of your different accounts with creditors. This gives you just one easy monthly payment to make. After your debts have been consolidated, a debt consolidation company will try to lower the respective interest rates with your creditors. One payment with one low-interest rate is easier than 5 payments with differing interest rates. Is Debt Consolidation a Good Option? Yes. But it completely depends on your financial situation. There are better options than debt consolidation, but only if you have the means to take them. The rule of thumb for using debt consolidation is this: if you have multiple debts with high interest rates and are worried that you will soon be unable to make payments, you should consider debt consolidation. As far as debt relief options go, you should consider them in the following order: Credit Counseling (if you have the financial means) Debt Consolidation (if you are running out of money) Debt Settlement (if you are out of money) Bankruptcy (only if a debt expert tells you to) Credit counseling will work just fine for those who are confident that they will be able to get out of debt by themselves.  But for those with a less fortunate financial situation, debt consolidation and debt settlement are great options. What Are the Best Debt Consolidation Loans for Bad Credit? Debt consolidation companies are judged according to customer reviews, their ability to consolidate debt and negotiate lower interest rates. Companies can generally provide estimates for pricing, additional fees, and post-consolidation interest rates. Consolidated Credit Consolidated Credit has helped over 5 million customers with debt. It is one of the largest credit counseling companies in the nation. Consolidated Credit does not disclose its projected interest rates after reduction but is upfront about pricing. Average fees per month at Consolidated Credit are $0-69/Month. The company also has an upfront cost of $0-49. The company is highly rated on BestCompany.com. DebtWave Credit Counseling DebtWave Credit Counseling offers credit counseling and debt consolidation services. Many of the company's financial education resources are free and available online.  The company claims to be able to reduce your interest rates down to one interest rate of 7.5 percent on average. DebtWave Credit Counseling costs $10-49/Month and has a one-time, setup fee of $50.  Accredited Debt Consolidation Accredited Debt Relief's debt consolidation program is designed to help customers achieve lower interest rates with their creditors. The company also provides debt management, bankruptcy counseling, and credit counseling services. Customers can expect to pay between $10 and $40 per month. There is also an average upfront cost between $0 and $100.

E.E. Cummings once said, "I'm living so far beyond my income that we may almost be said to be living apart." When you are living beyond your means, your debt can easily take on a life of its own. Debt is an increasingly common part of life for many Americans. According to a study performed by the PEW Charitable Trusts, 8 in 10 Americans have debt (most commonly mortgages), and 7 in 10 say that debt is a "necessity in their lives."Debt can leave you feeling both overwhelmed and enslaved, especially since the average debt for a balance-carrying household is $16,048. There are many strategies and options for managing and paying off your debt. Depending on the severity of your debt, this can be an intimidating and discouraging process. Many companies offer debt consolidation and debt settlement services to help you manage your debt. While both services help manage debt, there are some important and distinct differences. What Is Debt Consolidation? Debt consolidation is the process of combining all your debt into one simple payment. It usually involves taking out a new personal loan or working with a respectable credit counseling agency. You still pay off all your debt, though usually under more favorable terms. Applicants who achieve lower interest rates may be able to pay off their debt more rapidly.Debt consolidation, if used properly, can help your credit score long term, if you pay off your debt consolidation loan in a timely manner. However, if you miss payments or close all of your accounts immediately after paying off your debt, your score could be negatively impacted. Is It Right for You? Debt consolidation is a great option if you have high-interest rates on your current debt. This is especially applicable to credit card debt. The average credit card APR in March 2017 was 15.59 percent. Companies such as Consolidated Credit offer an average APR of 6 to 10 percent.It may also be a good fit if you have high monthly payments. Debt consolidation allows you to achiever better repayment terms. A lower monthly payment makes it easier to stay on top of your debt and prevents you from accruing late payment penalties.Debt consolidation is usually best for individuals with good credit scores. A good credit score will allow you to receive the best possible interest rate if you take out a debt consolidation loan. A poor credit score may not provide more favorable terms than your current credit plan. Additionally, debt consolidation tends to have a less significant impact on your credit score than debt settlement. This is true with both consolidation loans and working with a credit counseling agency.Finally, debt consolidation is a great option if you have an abundance of monthly bills. Debt consolidation provides the ease of one monthly payment to one creditor. If you only have one creditor, then you may want to consider other options such as a debt management plan or debt settlement. What Is Debt Settlement? During debt settlement, a company negotiates with your creditors to settle your debt for less than the original amount. Typically you will pay money into an account and that account will be used to pay your creditors. Often you are encouraged to fund the account, rather than pay off your balance. The company will then use this money and your lack of payments to convince your creditor to settle your debt.Because you are paying less than the amount owed, there are usually more significant ramifications with debt settlement than debt consolidation. For example, your credit score and report are negatively impacted. According to the NFCC, your credit score could decrease by 65 to 125 points. After settlement, your debt is often marked as "Settled" or "Paid Settled" rather than "Paid in Full." This will show on your credit report for seven years. In addition, debt settlement has varying results. You can search for reputable companies who are ranked highly on sites such as BestCompany.com. Is It Right for You? If you cannot manage your debt through other alternatives, such as debt management programs or debt consolidation, debt settlement may be a good option. Top companies such as Pacific Debt Inc. recognize that debt settlement is not right for every circumstance. As a result, many debt settlement companies require a minimum debt amount, often over $7,500 or $10,000. If you have a smaller amount of debt, you may want to consider other options.Debt settlement allows you to pay off your debt through one monthly payment. According to Freedom Debt Relief, it also allows you to pay off your debt faster than making minimum payments.If you have a low credit score, debt settlement may be a good option. A low credit score may disqualify you from lower interest rate options. Debt settlement is also ideal if you are considering bankruptcy and have no means to pay off all of your debt. According to National Debt Relief, debt settlement programs tend to lower your credit score significantly less than bankruptcy, typically by half as many points. After debt settlement, with wise choices, you can rebuild your credit score. Choose the Option that Meets Your Needs There are many options for debt management. Remember to consider factors such as your credit score, the total amount of debt, and your present interest rates. Assess your individual circumstances to see if debt settlement or debt consolidation is right for you.  

You need to raise your credit score. Here's how: Piggybacking, error disputing, and credit utilization tracking are just a few of the great tips we have for you today. Once you've finished this article, you'll understand why your credit report is so important, the role debt plays in determining your credit report, and some expert opinions on how to get it back up. If your credit took a dip, debt likely played a part. Some people go to debt settlement companies to negotiate a lower debt payment with creditors and lenders. Others successfully find ways to dig themselves out of debt. Either way, your credit score is suffering from the experience.  Allow us to break things down for you. Understanding Your Credit Score Before beginning the long trek to a better credit score, you need to understand what a credit score is and exactly why a good credit score is needed. Try taking our credit score IQ test to see how much you already know: What Is a Credit Score? Your credit score — often called your FICO score — is a three-digit number ranging from 300 to 850 that measures your credit habits. This includes how much you spend, how quickly you pay it back, how many late payments you've had, what percentage of your credit maximum you've used, and so on.   The higher the number, the better your credit report is. Typically, a score above 720 is considered a good credit score, but if you're below 600, you're in trouble.   For many reasons, your credit score seems to be closely related to your income level. In fact, Value Penguin reported low-income households had an average credit score of 664.     Your credit report is important because it tells prospective lenders, employers, landlords, and others how responsible you are with your credit. If you have a bad credit score, you might not qualify for a loan you want because a banker wouldn't see you as responsible enough to pay it back effectively.   A landlord might also turn down your application for an apartment because he/she might have reservations on whether or not you can keep up with rent. Believe it or not, employers sometimes look at credit scores as well to see how financially responsible a potential employee is. Obviously, learning responsible credit habits isn't just important, it's a necessity.   Rebuilding Your Credit Score According to Sarah Davis from Money Under 30, if you have bad credit "you could end up paying over $200,000 more [than someone with good credit] in unnecessary interest just because of bad credit." Seen in this new light, bad credit and debt essentially become the same thing. Debt gives you bad credit and bad credit gives you even more debt. It's a hole that needs to be filled. Here are the best methods for rebuilding your credit score: The Piggybacking Method According to Matthew Pillmore, President of VIP Financial Education, you can begin piggybacking off of a friend or family member’s credit card account to get your credit score up to 700+ in as little as 45 days.   This is a credit building method that FICO has threatened to remove from its factoring of credit scores, but it still works. The piggybacking method allows those with low credit to become an authorized user (AU) and adopt the entire credit history of the said account.   But, does your negative credit affect the credit score of the primary account holder? No, only good credit history is "adopted" to either person’s credit history. Make sure you become an authorized user in such cases (don’t use co-signing, as it is much riskier for both parties). The best accounts to be added to will meet the following criteria: Must be accounts that report (if the creditor doesn’t require the authorized user to provide an SSN, it can’t report on your credit report. Otherwise, you should ask the creditors or lenders ‘am I liable for this account?’) Make sure the account has a long history (over 5 years). You want to add substantial history to your account so that it has a large and highly positive impact on your credit score. The account has a large credit limit (at least $5000). Balance must be low and has to have been paid on time every month. Be very careful — obviously, you should only add accounts that are going to positively contribute. The recommendation is that you should use the piggybacking method, not to boost your credit score, but to get it to a place where you can start building your own positive credit history.   Remember, the goal when using the piggybacking method isn’t to get financing quite yet. Instead, the piggybacking method should be the first step you take to building your credit score.   Examine Your Credit Report and Dispute Mistakes Since the information that counts most is that which the credit bureaus have, you should contact AnnualCreditReport.com to get your yearly free credit score or a credit report from each one. Make sure to get your full credit report from all three credit bureaus, TransUnion, Equifax, and Experian. Examine your credit report meticulously.   You are looking for errors pertaining to: Your identity (name, phone number, or address) Incorrect account status (closed accounts are open, report states you are the owner of the account instead of AU, incorrect report of delinquent status, same debt listed multiple times, etc.). Balance errors (incorrect credit limit or current balance). Focus On High-Interest Debt The first step when you find an injured person is to stop the bleeding — the same is true of stopping a declining credit score. You have to find the source of the damage and immediately stop the loss of credit. This means you need to tackle your debts head on. Putting extra money toward high-interest debts is a popular debt and credit management strategy. It is more commonly referred to as the debt avalanche method. The advantage of this method is that it lowers your debt-to-income ratio, an important factor in determining your credit score. Additionally, you can try to identify accounts in which you are nearing your credit limit. Staying well below your credit limit will help you maintain and build a healthy credit score. How Does Divorce Affect Your Credit Score? Divorce is a nasty business and it has been used in the past to harm an ex's credit score. It's important to know that it isn't the actual divorce itself that often hurts a person's credit score, it is the negative circumstances that divorce causes. And divorce doesn't necessarily have to hurt your credit report; it is possible to make a clean break.   If a couple has a joint account before the divorce, they are still jointly responsible for the account after divorce. Judges have been known to assign one spouse the financial responsibility for such accounts. In some sad cases, the spouse responsible for paying the account will purposefully neglect to pay fees in order to hurt their ex's credit score out of spite. How Does Debt Settlement Affect Your Credit Score? There's no sugarcoating it: working with a debt settlement company can do some serious damage to your credit score. Some experts say that applying for debt settlement is almost as bad for your credit as declaring bankruptcy.   Asking for a settlement in and of itself won't hurt your score, but once the request is reported, your credit score will more than likely be lowered. For example, in 2009, FICO released two hypothetical scenarios of how debt settlement would affect two consumers' credit scores. One consumer with a score of 680 experienced a loss of 45–65 points. The other consumer with a score of 780 experienced a loss of 140–160 points.   When a debt is settled, creditors or lenders may mark it on your credit report as "Settled" or "Paid Settled." To be truthful, any status other than "Paid as agreed" or "Paid in full" is bad for your credit, but anything is better than "Unpaid." Sometimes a lender will list your debt to the credit bureaus as "Paid" depending on your debt settlement company and your lender, and this won't hurt your credit report as much.   Regardless, it's tough to tell when this will happen.   Remember, if you're already 180 days behind in paying back your credit card, your credit history likely isn't going to get much worse. At that point, debt settlement would be an excellent option.   If you're not even 120 days behind on your credit card payment, proposing to a debt settlement company probably isn't the best idea. Debt settlement should be a last resort. And since that's the case, you shouldn't waste your time going with companies that aren't established and reliable.   Customers should be aware that lenders are under no obligation to settle a debt, so be aware that a debt settlement company that guarantees such negotiation is likely being dishonest. Expert Debt and Credit Repair Advice I asked dozens of debt experts what they considered the best strategies for both getting out of debt and rebuilding your credit score. Here's the best of the best of what they had to say: Credit Utilization - Joe Hogan (LinkedIn), Director of Financial Planning at Mariaca Wealth Credit utilization is a measurement of the usage of your available credit compared to the maximum allowed by the lender. It is calculated by taking the ratio of outstanding credit balances to the overall limits.   High credit utilization negatively impacts one’s credit score. From the lender’s perspective, someone who is taking out a high percentage of the credit offered to them is a higher risk than someone who uses lower amounts. High credit utilization can be an indicator that a borrower is financially overextended and may fall behind on payments. This is so important to lenders that it accounts for 30% of your credit score.   A high credit utilization is typically calculated as over 30%. Lenders evaluate credit utilization on each source, not as an aggregate.   There are a few easy ways to lower credit utilization and increase your credit score. First, you can make payments more frequently to continuously carry a lower balance. If a lender is reporting figures to the credit bureaus a few days before your payment, you may have your highest utilization ratios of the month being reported to the lender. You can also increase your credit limits through your existing lenders to decrease your utilization. Of course, the easiest thing to manage your credit utilization is to use your credit card prudently, only borrowing what you can repay now.   Credit Counseling - Howard Dvorkin, CPA and Chairman of Debt.com For people obsessed with secret hacks, they’re not going to like what I have to say. Your best bet, hands down, is credit counseling. The problem is, few people believe it’s real. I’ve been asked, “How can there be a nonprofit that wants to give me free advice on how to get out of debt? And if it’s free, how good can that advice be?’ But it’s true. Nonprofit credit counseling agencies exist, some for decades. You can call a certified counselor for a free debt analysis. From there, you might be pointed toward a program that costs you a few bucks, but always much less than you’ll save. Or you can say, “No thanks” and just jot down the advice they give you. I never understand people who pay up front for a service they hear once on the radio, but they won’t make a free call to a nonprofit. Debt Avalanche Method - Caleb Backe, CFO of MapleHolistics.com   Because payment history is one of the first considerations of credit bureaus, it’s important to pick a debt strategy that will enable you to make payments on time and positively affect your credit score.   The debt avalanche method of overcoming debt works on the assumption that you are legitimately able to curb spending and increase your earnings. Likewise, this strategy requires any money left over at the end of each month go to minimizing your debts. Unlike the snowball method, debt avalanche has borrowers concentrate on paying down their debts with the highest interest rates first. Even if this debt is not your highest, it’s the most expensive.   Different Debt-Payoff Strategies - Mikel Van Cleve (Twitter), Director of Personal Finance for USAA The impact on one’s credit score can vary from person to person depending on other factors in a person’s credit history. Having said that, there are certain potential impacts on a person’s credit score to consider when evaluating different debt payoff strategies.   DIY payoff methods - Find extra cash flow each month to put toward debt. USAA uses a 3-As approach to help members pay down debt: assess, avoid, and attack. Assess the amount of debt you have and your budget. Avoid adding more debt until things are under control. Put away the credit cards and put some money into savings so you won’t need the credit cards when life throws you a curveball. Attack by putting together a debt payoff strategy and sticking to it. USAA offers its member a free Debt Manager tool to create a plan and track progress. Following this approach could help improve an individual’s credit by lowering the amount of debt you owe. Amounts owed or utilization is the 2nd largest factor in the FICO® credit scoring models.   Balance Transfer – You could consider transferring credit balances to a card with a lower balance. There are fees and interest rate terms to consider with this approach. There’s also the risk of transferring the balance to another card and then charging up the old card again. This would negatively impact one’s credit. You may need to apply for a new card to do the balance transfer, which could have some impact on the credit score due to the inquiry. Additionally, if you close the old card and the new card has a lower credit limit, you could increase your utilization and lower your score.   Consolidation loan – Like a balance transfer, be sure to understand the fees, interest rates, and terms. Also note that while a consolidation loan may make the payments more manageable, it could be the result of paying over a longer time period which could cost you more in interest. Applying for a new loan or closing the old credit account(s) would have the same impact as mentioned under balance transfers.   Debt Consolidation and Forbearance - Jennifer McDermott (Twitter), Consumer Advocate for Finder.com   Debt consolidation – Consolidating debt by taking out a larger one or transferring the one credit card can help people pay off debt faster as it can be easier to manage in one rather than multiple places. It may also see you benefit from a lower interest rate which will mean you pay less in the long run. If you are closing accounts you have had for some time this can negatively impact your credit score as it will lower your credit age. However, it may have a positive impact if you are using a credit card with a higher limit, lowering your credit utilization rate. Deciding on this method really comes down to the terms and conditions of the consolidation method being a better fit.   Forbearance programs – If falling on hard times is making it challenging for you to repay your debt, you may be eligible for forbearance. This is when a creditor gives you a grace period in which you can pay a smaller amount for a temporary amount of time. The credit card debt still needs to be paid back in full, but you have some of the pressure taken off while you get back on your feet. This should make it easier to make your monthly minimums, which means your credit score won’t be impacted by missed payments.   Refinancing - Dock Treece, Staff Writer at FitSmallBusiness.com   To my knowledge, just about any debt negotiation strategy has some kind of negative impact on a debtor’s credit. Bankruptcy hurts your credit, as do debt settlements. Debt forgiveness often has a short-term negative impact, as it’s almost always part of a larger debt settlement. Even refinancing requires hard credit checks, lowers the age of your credit, and raises your utilization – all things that can hurt your credit score.   If you’re looking to negotiate debts, overall the best thing you can typically do is try to refinance. Try consolidating debts and rolling everything into a term loan with a set payment schedule that you’ll have no trouble meeting. Most importantly, quit adding to your balance. These steps, taken together, will minimize the negative impacts on your credit and allow you time to rebuild your score. Debt Is Temporary Remember, if your credit score is suffering, it doesn't have to be like that forever. With patience, you can raise it by practicing some basic habits: Don't buy anything you can't afford immediately Always make credit card payments before the due date comes Don't make expenses surpassing one-third of your credit card maximum If your credit report has been dinged and you still have debt, you should seriously consider getting your debt under control before focusing on rebuilding your credit score (in most cases, the two go hand-in-hand).   If you find yourself over your head and debt settlement is the only option, there are reputable companies waiting for you. Best Company has rated nearly 50 debt settlement companies operating in all 50 states. Companies such as Freedom Debt Relief and Pacific Debt Inc. currently rate the highest in terms of customer satisfaction, operation fees, and accreditations.   It can be hard to have a temporarily bad credit score, but it's not as bad as having a substantial amount of unpaid debt hanging over you.

Where there are people in crisis, there will always be other people looking to take advantage—and the debt settlement industry is no exception. Unfortunately, it only take a few rotten apples to make the entire debt settlement industry as a whole look shady and foreboding, which poses a major problem to legitimate companies out there to help those in need. There is a short list of things to look for when a scam artist is posing as a legitimate debt consolidation company. Here are the things you should look for. Tall Upfront Fees The biggest indicator you're being scammed is the upfront fees. Scammers will try to get you to pay large sums upfront, claiming that it's for legal expenses or something of the like. Don't believe this. A lot of scammers will try to take as much money as they can upfront, then split before they pop up a few months later under a new name, address, and phone number. Lofty Promises or Guarantees A good rule of thumb is that if it sounds too good to be true, it probably is. A lot of scammers will try to lure you in claiming that they have access to a special government program or have a special/secret method to completely eliminate your debt. Occasionally, they'll claim to reduce your debt by some substantial number, such as 70 or 80 percent. Don't believe this. If the company is touting itself as a company that can promise you the moon, they definitely have something fishy going on. Move along. Pushy Reps and Scare Tactics If your debt settlement company has all the shrewd pushiness of a used car salesman, you'll want to turn away. They'll likely use words along the lines of "quick" and "painless," or they may also try to scare or intimidate you into thinking that if you don't sign now, you'll miss out on something. Don't believe this. The truth is, paying off debt is long and painful. There's no way around it. A proper debt settlement company will have professionals helping you through the arduous process of repairing your credit, but don't expect to crack open a cold one and relax in your chair while it happens. Real professionals won't try to scare you into signing with them; they'll help make you aware of your reality, and give you the cance to make an informed decision first. Jamming Communication One of the biggest red flags of all is if the debt settlement company tells you to stop paying your bills and sever communications with your creditors for whatever reason. Don't believe this. A legitimate debt settlement company will never tell you to do these things. No Accreditations There are actually organizations in the financial industry that serve as watchdogs over debt help companies. It's true! If a company has accreditations from one or more of these organizations, you can feel confident that they're more than likely legitimate. AFCC (American Fair Credit Council) BBB (Better Business Bureau) IAPDA (International Association of Professional Debt Arbitrators) Keep in mind that you shouldn't just believe the scammer if they say they're accredited with these organizations. It would be wise to visit these organizations' websites and look to see if the company's name is listed in their registry. If it is, that indicates a big thumbs up that the company is legitimate. Where Do I Go? Believe this: not only are there plenty of legitimate debt settlement providers out there, but there there are also a few trusty resources, like BestCompany.com, which ranks and reviews companies from best to worst. Currently, the top ranked companies in the debt settlement industry are Freedom Debt Relief and Pacific Debt Inc.

There's no way around it—the debt consolidation industry can be downright shady. Plenty of reputable companies out there that stand at the ready to help customers in crisis, but for every good company, there are plenty of rotten ones. So how can you tell who's legit and who isn't? It comes down to accreditations. A few key accreditations we'll look at are the National Foundation for Credit Counseling, the Financial Counseling Association of America, and the National Association of Certified Credit Counselors. National Foundation for Credit Counseling The NFCC was founded in 1951, which makes it the nation's largest and longest-serving nonprofit financial counseling organization. Members of the NFCC are experts in a variety of fields, including the following: Credit/Debt Counseling Bankruptcy Counseling Housing and Mortgage Counseling Reverse Mortgage Counseling Foreclosure Prevention Counseling First-Time Home Buyer Counseling Student Loan Debt Counseling Debt Management Plans Credit Report Reviews Financial Education Debt Management Plans (DMP) are one of the services that NFCC specializes in. A DMP is essentially the same thing as a debt consolidation plan. It involves paying off debts to creditors over a length of three to five years and eliminating the debt which you already have. Your NFCC representative will help you devise a payment plan that will best fit your budget and will get you out of debt as quickly as possible. Every member of the NFCC is accredited by the Council on Accreditation (COA), which mediates the efficiency of a nonprofit financial counseling agency. Financial Counseling Association of America The FCAA is all about making sure customers of debt management services receive the highest quality assistance available. The organization also exists to make sure there is an equilibrium among the customer, creditors, and the member agency. That way, everyone is beneficial and successful.The organization does this by providing consumer protection guidelines for its members, which involves oversight measures. The organization does this by providing consumer protection guidelines for its members, which involves oversight measures. The FCAA also represents its members before state and federal legislative bodies, including lobbying for consumer financial education and industry initiatives in the media. Member satisfaction is also measured regularly to measure the needs of its members. National Association of Certified Credit Counselors The mission of the NACCC is as follows: "Enhance the knowledge, skills, and abilities necessary to help clients increase in financial literacy, address negative money behaviors, and implement sound financial management through holistic financial and career counseling." NACCC members are required to continue their own education to become recertified after a two-year period. When a professional does this, it's a good sign that they're staying up-to-date on current financial laws and regulations. The curriculum to become NACCC-certified involves study in financial problem solving, consumer credit, consumer protection legislation, and the causes and solutions of delinquent debt. So members of the NACCC will not only help you plan to get yourself out of debt but will help you identify the behaviors that led you into debt. How Can You Know Who Has These Accreditations? Recently, Best Company has compiled a list of companies that are accredited with some of these organizations. Some of the top companies that include some of these accreditations include Consolidated Credit, DebtWave Credit Counseling, and DebtGuru. See them for yourself, and avoid getting scammed!  

You need to get out of debt, so we've made it easy to find your best options. Debt settlement companies are designed to help those in dire financial situations negotiate or resolve debt with creditors. Once you've read this article, you'll know which debt settlement company is best suited to your unique financial situation. The fact is that there are so many debt settlement companies out there, that it can be difficult to find the perfect one. That's why we've been careful in selecting our top five most qualified debt settlement companies. How We Evaluate Debt Settlement Companies At BestCompany.com, we evaluate debt settlement companies on a set of carefully selected ranking criteria, which includes important qualities like a company's minimum debt requirement, national accreditations, associated account setup fees, and of course, price. For example, companies with a low minimum debt requirement (e.g. $5,000) tend to have higher scores that companies that require upward of $20,000 in minimum debt. Similarly, companies with few account setup fees, or that charge a lower service fee-a percentage of the total debt, paid to the company-below industry averages, also receive high marks. Top companies also provide their services to more states and have been accredited by the American Fair Credit Council (AFCC) and/or the International Association of Professional Debt Arbitrators (IAPDA). Each debt settlement provider is independently reviewed and ranked using the same set of standards, and companies that demonstrate consistent excellence across our ranking criteria earn top marks. To learn more about the specific considerations that go into our debt settlement ranking criteria, check out how we rank.  After thoroughly investigating each debt settlement provider in the industry, we've identified five companies that stand out from the rest: #1 Freedom Debt Relief   Since 2002, Freedom Debt Relief has been at the forefront of regulating the debt settlement industry. In 2010, the company helped establish rules with the FTC that protect consumers from predatory debt-settlement practices. Freedom Debt Relief is also a founding member of the American Fair Credit Council and a Platinum member of the International Association of Professional Debt Arbitrators. In 14 years of business, the company has settled more than $5 billion in consumer debt in approximately 24-48 months per case (though this is not a guarantee). What we like about Freedom Debt Relief We like Freedom Debt Relief's flexible customizable program, which allows clients to set their own repayment terms. Customers can choose both the amount and the frequency of their payments and can rest assured that absolutely no fees will be charged until after the debt settlement services have been rendered in full. We found Freedom Debt Relief's Savings Estimator to be especially useful to customers who might be hesitant to sign up for a free consultation. The Savings Estimator calculates total savings, length of the program, as well as the suggested monthly deposit.   #2 Pacific Debt Inc. Coming in at second place is Pacific Debt Inc., which got its start in 2002 as a response to the growing consumer debt epidemic in America. Pacific Debt is an accredited member of the American Fair Credit Council and the IAPDA and provides a simple enrollment process along with a client care team to help customers navigate the early stages of debt settlement. Each customer is assigned a personal account manager, who provide monthly updates on the customer's progress, as well as negotiates with creditors to speed up the settlement process. What we like about Pacific Debt Inc. One of the reasons we awarded Pacific Debt our number two spot is how easy its enrollment process is. Pacific Debt does not require customers to have a certain credit score before doing business, meaning a wider range of people — even those whose debt problems have severely affected their credit — can apply for debt settlement services with Pacific Debt. We also like Pacific Debt's low service fee of 17-20%. Many debt settlement services charge between 21% and 24%.   #3 SettleBankDebt.com Our third-ranked debt settlement company has impressed customers by offering a unique approach to those seeking financial freedom. Instead of encouraging customers to stop paying their debt in order to negotiate, the company only takes on customers that already have unsecured debt that is in collections or have been declared delinquent; this way, customers do not suffer any more penalties to their credit score than is necessary. SettleBankDebt.com has been in the debt relief business since 1996. But, how much does SettleBankDebt.com cost? The company only charges customers anywhere from 5% to 10% of their total enrolled debt.  What we like about SettleBankDebt.com We are particularly impressed with SettleBankDebt.com's prices — 5% to 10% fees are practically unheard of in the industry. The downside to these amazing prices is that the company only takes on debt that has already been sent to collections. We love the fact that SettleBankDebt.com has taken a creative approach to tackle the problem of damaged credit scores within the debt settlement industry. Most debtors opt to pay and negotiate with creditors themselves through DIY programs or financial education resources. But for those who are being hounded by debt collectors and need debt help now, SettleBankDebt.com is a great option.   #4 Accredited Debt Relief Accredited Debt Relief has been an industry leader in debt settlement services since its founding in 2008. Through its team of expert negotiators, Accredited Debt Relief has settled thousands of accounts for businesses and individuals alike. The company is also a staunch supporter of charity work and has donated to several prominent charities, including St. Jude's, the Wounded Warrior Project, and the Susan G. Komen Foundation. Accredited Debt Relief is aptly named, received accreditations from both the AFCC, IAPDA and the San Diego Regional Chamber of Commerce. What we like about Accredited Debt Relief Accredited Debt Relief service fees are among some of the lowest we've seen — as low as 15% in some cases. This demonstrates to us that Accredited Debt Relief is sensitive to the financially volatile situation many of its customers find themselves in. In that same vein, the company charges zero upfront account setup fees and has a minimum debt requirement of $7,500 (below the industry average). We appreciate the company's transparency with its "Proven Results" page, which details savings figures for some of its actual customers.   #5 CuraDebt In one form or another, CuraDebt has been assisting individuals and small businesses resolve their debt since 1996-making it one of the most experienced debt settlement providers in the entire industry. CuraDebt has received a number of accreditations and accolades from third-party organizations, such as the AFCC, IAPDA, The Netcheck Commerce Bureau, and the U.S. Chamber of Commerce. What we like about CuraDebt Something that stands out to us about CuraDebt is its approach to the service fee. Rather than charging a range of percentages based on a number of variables, CuraDebt simplifies the process by charging a flat 20% fee on your total debt-which is still less than what some other companies charge. CuraDebt's minimum debt requirement of $5,000 is also the lowest in the industry, which drastically increases the number of people CuraDebt can assist.   Be sure to review the full list of debt settlement companies we've reviewed.   The Future of the Debt Settlement Industry While several steps have been taken to ensure fair and honest practices are being implemented and enforced throughout the industry, debt settlement, as a whole, has a long way to go toward improving its reputation. Many financial experts strongly discourage consumers from using debt settlement as a means to resolve their debt because of the effect it can have on their credit scores. Experts also cite that, at least in some cases, debt settlement can actually result in more debt plus an even poorer credit score. When it comes to financial services in general, the knowledge gap between the financial expert and the average consumer is still very high. In order for debt settlement to remain a serviceable industry, companies must do more to foster good customer relationships. One way to do this is to be more upfront about what the debt settlement process entails, its effects, and who should or shouldn't enroll. Many people don't know that debt settlement is only ideal for those who can resolve their debt quickly, but do not qualify for other options. Companies should maintain compliance with all FTC regulations, and avoid creating false expectations (e.g., duration of the program, total savings, total costs, etc.). As the debt settlement industry continues to grow and evolve, BestCompany.com will continue to provide consumers with the latest news on industry standards, company rankings, and other pertinent news surrounding the industry. Our goal is to empower consumers to make better decisions when it comes to debt settlement; when you choose a top debt settlement company through BestCompany.com, you can rest assured it has been thoroughly inspected and approved beforehand.