Financial Freedom Help Blog

That dreaded “B” word bankruptcy. If its your worst financial nightmare, you're not alone. Few things have as negative of an impact on your credit score than a declaration of bankruptcy, making options like debt settlement, debt consolidation, and credit counseling attractive alternatives for people in financial straits. But these options each pose certain risks, all of which must be weighed before taking an action that could remain on your credit record for the next decade.

Consumer credit counseling
What is consumer credit counseling, and how do these types of services differ from declaring bankruptcy? There are many different forms of credit counseling and each of them works a little differently.

• Debt Settlement allows you to negotiate the repayment of a portion of the money owed, after which the debt will be considered paid in full. Debt settlement firms can negotiate with credit card companies and other lenders to pay back less than the full amount of your debt, or to pay it back more slowly.
• Debt Consolidation is the process of combining all of your debts into one loan, arranged through a bank or a consumer credit counseling service. Debt consolidation makes it possible to lump all of your balances together at a lower interest rate, saving you money and allowing you to repay the debts more efficiently.
• Debt Management is a service offered by credit counselors in which a system is set up to help you pay back your loans and debts in the long run. This system does not actually change your debt; it simply combines your loans into one monthly payment to the debt management company, who then makes the individual payments to each creditor. This type of credit counseling offers the least benefit to consumers and is most conducive to scams.

credit counseling and Your Credit Score
While each of these credit counseling services does affect a consumer's credit rating, its definitely a lesser evil than the black mark of having declared bankruptcy. Bankruptcy stays on your credit history for 7 to 10 years (depending on the type of bankruptcy filed) and may deter credit card companies, banks, and other lenders from doing business with you in the future.

credit cards are so common with people today. While some of them do know their limits, some are overwhelmed with the credit limit that is given and tend to use up the entire money. Later, they realize that they have to repay this huge debt on their own. If you think that you cannot repay your debts and are close to going bankrupt, it is best to choose debt settlement. Debt settlement is one of the best methods to get out of debt fast.

Debt settlement is the negotiation between you and the creditor or a third party representing you and the creditor. First of all, if your financial status is too weak and does not permit you to resort to any other debt settlement company, then it is in your hands to talk to your creditor about your present situation and your incapability in paying the money.