Payday Loans Debt Consolidation

How To Consolidate Payday Debt Without Hurting Credit?

You need to be very careful with your strategies if you want to consolidate payday debt without hurting credit. In general, if you do not take proper precautions and do not do the basic homework thoroughly, making payments to your lenders as part of a debt consolidation program will seriously damage your FICO score. When lenders report it to the credit bureaus that the payments have been made as per a consolidation plan, credit bureaus add a negative entry to your credit report, which eventually reduces your overall score. But, there are still several ways not just to protect your credit health but also to improve the same. Following is a brief rundown on how to do it.

Consolidate Debt Through A Big Conventional Loan

You can consolidate payday debt without hurting credit if you borrow a big conventional loan and then pay off all your existing payday loan debts using the money thus borrowed. This way, the payday loan companies will report to the credit bureaus that you have made ‘full payments’, which will be treated as a positive entry on your report and you will see a significant increase in your FICO score. You can further improve your score by making timely payments toward the new loan you have just borrowed. You can use this method on your own without the help of any credit counselor or debt consolidator. You do not even need to negotiate with your payday lenders. But, it will be better if you do. Just make sure that when you ask them to waive off certain charges or reduce the amount of debt, the lenders must still agree to report the payments to the credit bureaus as ‘paid in full’, not as ‘paid as per a settlement plan’.

Hiring A Debt Consolidator

Professional credit counselor and consolidation agencies can also help you consolidate payday debt without hurting credit. Since October 2010, the Federal government has enacted specific laws to regulate the services offered by debt consolidation companies. As per these laws, it is legally mandatory for all such agencies to disclose all the terms and conditions of their services clearly in a written contract. The written agreement must tell you in a clear language that how exactly the program is going to handle your debt situation and when and how much you will have to pay for it. There must not be any hidden clauses. Besides that, it must also be explained that how the agency is going to protect your credit or how your credit will be affected because if you make payments as per a specific program. A reputable debt consolidator knows how to negotiate with lenders and convince them to report only positive entries to the credit bureaus so that your credit score should not just be protected but should also be increased.

Overall, proper planning is crucial when it comes to finding out ways on how to consolidate payday debt without hurting credit. Whether you are doing it on your own or with the help of a debt consolidator, make sure you have done your research thoroughly.

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