How Will Debt Consolidation Affect My Credit Score & Ability to Obtain Future Credit

[Anonymous]

I am a self employed contractor.

I have a total of about $54K in credit debt, that breaks down like this:

(Only the underlined accts would be consolidated)

personal debt 

$7K - Citi/AT&T Univeral MC

$15K - BofA Gold Option (was told BofA wont work w/ me b/c of such high debt to low income ratio?)

$15K - AMEX

business debt,(but still my name)

$13K - Chase MC

$4K - Advanta MC

At last look, I had a FICO of 690.  I havn't been 30+ days late on any payment of any kind in over 11 years, but I am way broke right now b/c work has all but dropped off completely.  Given my current circumstance I thought it best to investigate ways to reduce monthly expense and hopefully become debt free in the near future.  So I spoke w/ a gentleman at In Charge Debt Solutions, (www.incharge.org), about debt consolidation.  It's my understanding that it is NOT a settlement, but MUCH lower interest rates would be negotiated.  I would in turn make 1 monthly payment to In Charge.  My currently monthly payment of $1,133.00 would become $916.00, (of which $49.00 is a payment to In Charge), and these balances would be paid off in about 54 months.

My questions are as follows:

1. Has anyone here used In Charge or familiar with them?

2. How does utilizing a service like this affect my credit score and ability to obtain future credit such as home loans?

3. If I do include the Chase MC, which is a true business credit card and my only one, how would that affect my business credit?

4. Is there a recommend company or organization that I SHOULD be contacting to do this?

5. Any and all useful information would be GREATLY APPRECIATED!

[RobertEG]

This is just my opinion.

If you understand your situation and credit scorng, there is nothing that a debt consolitdation company can do that you cant do on your own, if you know what to do.

They will contact your creditors to negotiate lower payments, and perhaps lower interest rates.  They cannot negate debt.

When they promise to make you debt-free earlier, all they are telling you is that they will attempt to reduce interest rates, and maybe negootiate a lower minimum monthly payment so that you dont incur additional montly delinquencies. 

You can do that on your own.

Most creditors would rather deal directly with the consumer than with a third party.

CRA reporting does not look at your personal contract with a debt consolidation company.  They dont care.

CRAs only record what creditors report to them.

If  you want to accept the role as a credit novice, then hire a debt consolidation company.

If you want to pick up the phone and talk to your creditors yourself, you will do as much if not more than they can offer you.

What is your % util on each account?

[Anonymous]

I was in a similar situation, relatively good FICO score, lots of c/c debt and struggling to make ends meet each month.  What you're talking about is a Debt Management Plan (DMP).  I joined one with another provider. 

First, look at the Proposal that the DMP agency provides you, you should be able to get this before you sign any agreement to officially join.   Call the creditors individually and see if they'd do a similar arrangement without the DMP company.  You'll save yourself that % of monthly fee.

If you flow accounts through the DMP, they will contact the creditors which will agree to lower your interest rates and spread your payments out over 5 years, after which you will be debt free from them.  Your accounts are closed immediately and you're not allowed to open new credit cards, or they may remove your low interest rate.  I've had rates go as low as 5.9-13% vs. some as high as 24, 32%.

It has not affected my score at all, but down the line once these accounts are paid off, it might affect me due to the accounts being closed and changing average age, but it's worth it to be debt free.

I kept one card open as an emergency card, as it already had a low rate.  

Some tips:

*Check to see that your rates will be lower on each of these cards, if they're not - don't pay to have that card in the program and save a few bucks on their monthly fee.  *PAY* the amount that the program would have, and try not to run up any new charges if you have the willpower - you'll have that card paid off in 54 months too.

*Make sure to talk to each creditor and have your due date changed to work with the DMP payment, my payment is taken out on the 19th and usually hits the creditors on the 27th.  I've had all my due dates moved to be the 30th-3rd of the month so that I do not get hit with late charges

*Keep an eye on all accounts when you first get setup to make sure the payments are received, they are meeting your minimum payment and that your due date works.  I had to double-pay a couple months until the due dates synched.

Money Management International and Care One Credit are other providers of DMP programs.

[Anonymous]

Thank you for replying and offering the great information.

I'd like to answer your question, but I am unfamiliar with the term "% util".

[Anonymous]

Thank You for the great info!

[llecs]

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froggydoggy wrote:

.....but I am unfamiliar with the term "% util".

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Utilization. Take the balance reporting on your CC and divide it into the CL. FICO factors in individual util and overall util.

Common Abbreviations

ETA...factor out the biz CCs if not reporting. Those don't matter for scoring if not reporting.

Message Edited by llecs on 05-29-2009 10:32 AM

[Anonymous]

The problem is that there are legitimate companies and scammers that advertise the same thing.

The way that the scammers work is that they steal your whole payment.  Or they divide up your payment among certain creditors, but do not make the minimum payments to all of your creditors.  Or they pay late. 

Look for non-profit companies that provide this service.  While there are companies that are legitimate, there are plenty of scammers, and it's hard to tell the difference until you're in over your head.

[Anonymous]

AMEX = 94% util

BofA = 90% util

Advanta = 83% util (but advanta is going out of business)

Chase MC = 78% util

Citi/ATT MC = 30% util

[Anonymous]

I've never even heard of In Charge.