Credit Repair

Should i work with a debt consolidation/repair company if my credit score is 518?

My credit score is 518 so i dont qualify for any loans at any banks, not even P2P lending like prosper.com. I have been reading books about debt management and i am considering going to one of these companies. What is holding me back is that i know it'll show on my credit report and by doing so i'll practically be filing for bankruptcy. i have a goal to zero down my debt ($6,000) in 2008. after i do so i want to begin saving money and start looking for a house to buy, which i know is a hard and long process. I have a lot of black spots on my credit report but i think going to a debt program will make an even darker mark on my history. is it worth it for me to consolidate my debt? will my credit score ever grow to the 700 range i wish for? how hard is it to get a house after going to a debt program?

Public Comments

1. Most of those places are rip offs. Check for Suzie Ormans FICA kit. It really shows how to improve your score yourself.
2. if you only have 6K in debt i would just buckle down and pay it off. debt management programs will damage your credit even further. instead f showing "paid off" on your credit report it will show "settled" or something similar to that. it will take 7-10 years for the black marks to come off your record and it will take awhile but your credit score could recover and make it to the 700's as long as you continue to pay everything off.
3. Well, first things first, you need to figure out a budget. Analyze where every single penny of your money goes over a month. Then, cut out the nonessential items. Do you have cable and internet? Stop the service, it will save you at least $100. Do you go out to eat, stop that too, and cook your meals at home, or take a lunch to work. That will save you another $50-100 a month. See where I am going with this? Now that you have cut out the unnecessary luxuries it's time to get down to business. Look at all your credit cards and figure out which have the highest interest. Cut them up except for one. Take that one, put it in a zip lock bag, put it at the bottom of a milk carton, fill it with water, and put it in the freezer. You have frozen some of your assets now. It will be very difficult to get the card for "emergencies", and you will think twice about how emergent the situation really is. Next, list all of your debts on a sheet of paper by name, amount owed, and interest rate. Start with whichever one you want to first, highest interest, highest balance, lowest balance, etc... Pay it off as quickly as possible while still paying minimum payments to your other debts. Once it is paid off, you can take that extra money and apply it to the next one, and so on. Once you have them all paid off, start a new debt. One to yourself for 5-10% of your monthly earnings. Put it in a high yield savings account such as Schwab checking, ING, or HSBC. You can find rates of saving on www.bankrate.com. Do this until you have accumulated 3-6 months worth of expenses. Now that you have done this, you can start saving for that house. So, keep saving and saving. If you get money back from a tax return, put every penny of it in the bank. If you get money for Christmas, put it in the bank. Do it until you have about a 15-20% down payment of a house in your target price range. Now, it is time to buy your house. You did it! It sounds simple because it is, but it really takes a lot of discipline and will power to achieve your financial goals. Just remember that you can do it! You didn't get into debt overnight, therefore, you won't get out of debt overnight, but it is certainly possible as long as you have a reasonable plan and stick to your goals. I wish you the absolute best luck, and I hope that this helps you figure out that you can do it on your own without a debt management company. Don't spend your money on them. Again, good luck, and if you have any questions, you can email me and ask away. kevinjunior_2000@yahoo.com
4. Kevin, Great Answer! Do what Kevin says. Make it a game of sorts to cut expenses, and apply the money you saved to your debt. Write everything down. Make those lists! Do what Kevin says! Sean
5. Debt CONsolidation will damage ur credit line as getting a mortgage is considerd. visit daveramsey.com to learn ur hard lessons from others bigger mistakes. 6000$ is 500$ extra job a month. Kevin's info is good. read 'house buying for dummies' 'total money make over' do ur homework b4 signing.
6. $6000? that's all? you would be marking your credit report for years over some small amount that you should pay off in 4-6 months. get a part time job delivering pizza and pay the debt off. that will immediately improve your credit. say no to all credit cards forever. store 3-6 months expenses up and live on less than you earn. within 2 years of being debt-free and paying rent ontime, you are fully bankable for a mortgage at the best interest rates. go to dave ramsey.com
7. WOw, great question. If i were yo i would declare bancruptcy, a 518 is a crappy score, if you declare bankruptcty, what your score goes down to 487??? Ddi you know that debt consolidation rpgrams are funded by credit companies, who will tell you that bankruptcy is like "the worst thing possible" Also lenders would love to to talk to a person that has declered bancruptcy cause you CANNOT declare bancruptcy for another seven years. you credit score can grow to a 700 but ut will take atleast eight years to do so. you will have to pay a higher interest rate on the mortgage anywase cause of your credit scores.