I would like to fix my credit so I can combine my debt. Can you help?

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Find yourself in a big credit hole? Do you have too much debt? You’re not alone! These subjects were the focus of recent questions sent to creditrepair.com via Twitter and Facebook.

Question

Hi. I have a 590 credit score. I would like to fix my credit so I can combine my debt. I don’t want money back. Can you help?

It may be very difficult to refinance your debt with a credit score in the 590s. Most people looking to combine debts have unmanageable, crippling payments they are struggling each month to pay. If this is the case, here are some ideas:

Answer

  1. First, I would review your credit report and dispute errors as described in the previous answer above. This may help to increase your credit score and put a refinance within reach. Second, you may have serious questions to ask regarding a credit report item’s fairness or verifiability. Don’t hesitate to ask smart questions regarding your credit reporting.
  2. If you own a home and have some equity, you may be able to do a cash out refinance with FHA and pay the down the balances. Note: FHA rules say a minimum score is 580, but you may have difficulty finding a bank that will accept a score so low – most want a 620 or higher.   You might want to wait until your credit is in a little better shape to go this route.
  3. The old-fashioned method for climbing out of your debt is to come up with extra cash out of your monthly budget to pay down balances, but this requires discipline. You might have to muscle under and control spending or increase your income to come up with the extra money. In addition to lowering your payments, decreasing your balances has the added bonus of increasing your credit score.
  4. As a last resort, you might consider Consumer Credit Counseling Services (CCCS). You can find a local organization by going to nfcc.org. With CCCS, the organization works with you to create a budget, negotiates lower payments with your creditors and comes up with a plan to pay off all your debts within 2-3 years. You make one payment to CCCS and the organization pays your creditors at the reduced rates.

Sounds good? There is a significant drawback: your credit will take a hit. It will be noted on your credit report that you have entered into one of these programs, and securing new credit will be tough. In addition, during the program, some creditors may report you as late though you make on time payments to CCCS. Why? You are not sticking to your original payment agreement (the one you made when you applied for the card) with the credit card company.

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