Poor Credit Debt Consolidation- Powerful Tips to Help

Sunday, May 17th, 2009 at 10:09 am

Poor Credit Debt Consolidation

It is not hard at all to mare or make shambles out of one’s credit score and thus acquire the stigma of having poor credit rating. Such a stigma may not affect the day to day life of a person who carries it but it may and most likely will affect his or her financially in a most derogatory way.

But let us back up a few steps into the realm of credit ratings which are orchestrated by three major credit bureaus: Equifax, Experian and TransUnion. All or at least most transactions carried out by individuals or companies that involve credit issues (taking out lines of credit, acquiring mortgages, requesting new credit cards, making installment payments, etc.) are reported to one, two or all three of the major credit bureaus; as are the non-payments, late payments, bankruptcies, and so on.

Each of the bureaus keeps track of the information that was submitted to it and thus credit history is established and it may vary, sometimes even greatly, from one bureau to the next. With the help of a specialized piece of software that was developed by the Fair Isaac Company (FICO), the credit history is then used to calculate credit ratings by factoring in a number of components and the most crucial among them are debt to income ratios and late or non-payments which, of course, will lower the FICO scores that range from 300 to 850.

With 850 being the highest possible credit rating, I seriously doubt that anyone has ever reached it in the past or will ever reach it in the present or the future. However, any score below 619 is considered poor credit while a score below 550 is deemed untouchable and no conventional lender will be willing to risk doing business with an individual or a company with such poor credit rating. How do lenders know an individual’s or a company’s credit rating? It’s as easy as simply requesting reports from all three of the major credit bureaus which are always willing to make their records available.

Fortunately for those with poor credit ratings, there are a relatively small number of lenders who specialize in poor credit debt consolidation and they are willing to take the risk where others are not.

Poor credit scores are certainly not something to strive for but they do not have to be permanent fixtures in anyone’s life. As financial situations change and as management of finances improves, so can FICO scores. Until then, let us look at what poor credit debt consolidation entails.

First of all and most importantly, poor credit debt consolidation can serve as a means by which to heal poor credit because they make it easier for borrowers to pay off their debts. This is accomplished by merging outstanding debts and creating a new loan with easier terms such as lowered interest rates, extended pay-off time and lower monthly minimum required installments. Furthermore, poor credit debt consolidation helps borrowers to take control of their finances, to feel better about their future, and to obtain cash for necessities which they would otherwise not be able to acquire.

Warning! Poor credit debt consolidation should never be established without professional counseling about management of money, advice about earning versus spending, tips about saving for “rainy days,” and so on. Without that it would be like putting money into the hands of someone who will repeat the same patterns and thus it would prove to be not only pointless but also counterproductive.