People typically consolidate credit card debt if they have debt on high-interest credit cards and are incurring high-interest charges. By consolidating credit card debt, they can potentially save a great deal of money on interest payments and get out of debt sooner than if they left their debt on high-interest credit cards since more of their payment will go toward their principal balance.
If you’re not disciplined enough to create a budget and stick to it, to work out a repayment plan with your creditors, or to keep track of your mounting bills, you might consider contacting a credit counseling organization. Many are nonprofit and work with you to solve your financial problems. But remember that “nonprofit” status doesn’t guarantee free, affordable, or even legitimate services. In fact, some credit counseling organizations — even some that claim nonprofit status — may charge high fees or hide their fees by pressuring people to make “voluntary” contributions that only cause more debt.
Another avenue to pursue to improve your credit score as quickly as possible is to negotiate with your creditor and credit bureaus to see if they are will to make adjustments. This can be especially effective if you have established a current strong payment record. In that case, a creditor can often be persuaded to remove previously reported late payments as a “goodwill” gesture based on your current payment history, and to encourage you to maintain the course.
A low credit score won’t necessarily prevent you from getting a loan, but it could impact your ability to get a competitive rate. Most people have credit scores in the range of 600 to 750, according to Experian. For scores that fall within the 300 to 850 range, the consumer credit reporting agency cites a score of 700 or higher as good and 800 or higher as excellent.
If you have a high balance on a credit card and are only making minimum payments, start paying down the balance. It's important to pay down (or even better, pay off) revolving accounts such as credit cards. This will lower your credit-to-debt ratio (what you have borrowed in relation to what you could borrow), and is one way to improve your credit score. Paying off installment loans such as auto loans, student loans, etc. won't improve your credit score as dramatically.
What is it? Home equity loans are for a fixed amount of money for a fixed time and at a fixed interest rate — but they are secured by your home. That means your home is collateral, and if you default on your loan, the lender may foreclose on your home. You can borrow a certain percentage of your home equity. That’s how much your home is worth minus how much you owe on the mortgage.
What is it? Balance transfers are when you transfer debt from a current credit card to a new card, ideally one with a 0% intro APR period. The intro period is for a set amount of time that can range from 6-21 months. Many cards offer 0% intro APR balance transfer offers in order to convince credit card users to give them their business. It’s a win-win situation for the lender and the borrower.
Your best bet is to call and ask to see if they can put you on a payment plan where you can afford to pay them (even if it’s just the bare minimum a month) or if they will possibly settle for less money. A tip: anything that has your name attached (banking account,utility bills, credit cards, anything you finance, student loans, medical bills, car loans, home loans, your apartment, etc) that you miss a few payments on or don’t pay at all can be reported to the credit agencies and sold to collections companies.