Payday Loans Debt Consolidation

Payday Debt Consolidation And Credit – How Are The Two Interconnected?

Payday debt consolidation and credit are closely associated with each other. Each of them has an impact on the other. Whether this impact is positive or negative depends upon an array of factors. For example, if you have bad credit, it will be very difficult for you to qualify for a low-rate consolidation program. On the other hand, if your FICO score is good enough, you can easily manage and pay off your payday debts using a consolidation method. Likewise, when you work with a debt consolidator, it may affect your credit worthiness also. If you do not take much care and do not follow certain strategies in advance, a consolidation program can seriously damage your credit situation. Following is a brief overview on how to ensure protection for your credit.

Make Sure All Your Lenders Agree To The Consolidation Program

When it comes to understanding the connection between payday debt consolidation and credit, the first thing you have to keep in mind is that your lenders are not legally obligated to agree to any consolidation program that you are signing up with. Some lenders may be reluctant to work with a third party. You are advised to sign up with a program only if your lenders agree to it.

Reporting Of Payments To Credit Bureaus

Before you sign up, you must also find out whether your lenders are going to report the payments to the credit bureaus. In general, payday loan companies never report to the three major credit bureaus. If they are not reporting the payments, there is nothing much to worry about payday debt consolidation and credit. But, if they report that the loans are being ‘paid as part of a settlement plan’, it will have adverse effect on your credit score. In fact, these negative effects can be as severe as that of a bankruptcy. Therefore, it is very important for you to talk to your debt consolidator and ask them to convince your lenders that they should the payments as ‘paid in full’. This way, you will actually be able to improve your credit score as long as you are paying the consolidated monthly payments in a timely manner.

Overall, the relation between payday debt consolidation and credit is an important issue that you must study thoroughly before you sign up with a debt consolidator.

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