Home Finance Are There Companies That Can Really Fix Your Credit?

Are There Companies That Can Really Fix Your Credit?

Having many loans with lots of monthly payments can spiral out of control fast. This leads many people to give up on making payments and eventually stop paying back the loans they borrowed. This can have drastic effects on their credit scores and is often too hard to fix. Paying on time is the most important part but it is not the only element that can raise your credit scores. There are many companies that understand this and offer help, but are they much help? Let us understand some options.

Debt Settlement Companies

Debt settlement companies understand how credit scores work and can help pin point ways to raise the scores and organize your payments into the most effective score-raising arrangements. Their main method is by focusing on each loan separately. So instead of paying little payments to each debt collector, they help you save enough money to settle the entire loan, one lender at a time. This is because when collectors see larger sums of cash, they can accept drastic settlements which save lots of money. On the other hand, if little payments are made on each loan, then the interest and fees pile up and the payments are almost negligible. There is also the danger of reviving the statue of limitation of the loans or extending the date of last activity on the loans and hence causing the loans to stay for another 7 years on the credit reports. So settling each loan in its entirety, one at a time, is the best route to take to clean your credit report fast and raise your credit scores.

However, these debt settlement companies are costly and add to the debt burdens. They often charge up to 20% of the loan amounts to be worked on or up to 25% of the savings that the companies were able to generate by settling the loans. So if a customer had loans totaling $50,000, the customers can eventually pay up to $10,000. But if the loans were brought down to say $30,000, then the savings were $20,000, and 25% of that is $5,000. These are huge numbers and many customers agree to this torture to improve their credit scores dramatically and eventually save money on other future loans that are available only to people with good credit scores.

Another problem besides cost, is that many collectors intensify their efforts to collect their loans when they realize that the customers are using debt settlement companies. In return, the debt settlement companies may suggest to stop making any payments and hence cause your accounts to incur additional fees and interest costs to press the collectors to accept the lowest possible settlement amounts. This often works but is risky.


Another choice would be to use an attorney to file for bankruptcy. Remember that the debt settlement companies would not suggest bankruptcy because that would mean that you would not use their services, even if bankruptcy can be better for you.

Also the credit counseling programs can be great too. These are mostly non-profit organizations that educate people about paying back the loans while aiding in the process. Many creditors will not pursue collection efforts and will not charge late fees or additional interest costs while the customers are enrolled in such programs.

But to save the most money, the ideal way would be to educate yourself about what the settlement companies do and do it yourself. You would need to save money, negotiate with collectors, and settle your loans on your own, one loan at a time.


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