Yours can be a particularly vexing problem. You’re in credit card debt up to your ears AND you have bad credit. Resolving your situation seems hopeless, but all is not lost. Getting out of credit card debt with bad credit is doable.
What is a Bad Credit Score?
Granted, it can be tough to eradicate debt with a low credit score. However, there are credit card debt relief programs that take your situation into consideration. But before we get into that, let’s take a look at what constitutes bad credit.
Generally speaking, credit scores falling between 300 and 559 are looked upon as “bad”. A rating between 560 and 669 is seen as fair, while anything above 670 is considered “good.” Between 740 and 799 is considered “very good,” and if your score exceeds 800, well, you’re among the cream of the crop.
For the record, the average American consumer has a 698 credit score.
How to Improve Your Credit Score
Timely monthly payments and low credit utilization have the most significant impact on your score. In other words, pay your bills on time and don’t run your cards up to their limits. In fact, credit bureaus look upon people who use 30 percent or less of their available credit as being a better risk.
Among the other key elements comprising a credit score are the overall age of your accounts and how often you apply for new credit. So regular payments, low usage, old accounts in good standing and holding off on new applications will raise your score considerably.
Bad Credit Debt Relief Options
And, right about now, you’re saying. “That’s all well and good, but I need to do something about this situation right now.” As we stated above, you do have options, but they aren’t going to be particularly pretty with a low credit score.
Credit Card Consolidation
This form of debt relief can come in a number of different guises, including credit card balance transfer offerings and personal loans. The problem here is the interest rate you’ll be charged when you have bad credit.
The real benefit of debt consolidation is bundling all of your debt into one loan — ideally with a lower interest rate than the one you’re currently paying.
This will save you money, even as it helps speed the process. In some cases, you might still find a deal with a better rate than you have, especially if you’ve had some problems, so it’s worth looking around.
Home Equity Line of Credit
Many people have used the equity in their homes to consolidate credit card debt. This can work, even if your credit score is on the lower side, because you’re offering the lender collateral in exchange for the loan. However, the downside of this approach is if you default on that loan, the lender can force you to sell your house to repay them.
Debt Management
The next option in line is entering a debt management program. You’ll work with a credit counselor, who will review your finances looking for ways to move your money around to make paying your bills easier to do. It might be as simple as cutting back on some luxuries.
This counselor can also get in touch with your card issuers and ask for better terms in exchange for having a professional take over the management of your accounts. Sometimes they’ll agree to lower your interest rates, which can be the same as a consolidation in some ways.
Debt Settlement
If your situation is beyond the range of any of the above options, your next choice is credit card debt relief programs with a company like Freedom Debt Relief.
After reviewing your finances and determining your ability to pay, an agent of one of these companies will get in touch with your creditors and offer to settle your accounts for less than you owe — in exchange for a one-time payment in full of the amount upon which you all agree.
You’ll be required to place money in an escrow-like account, from which your settlement agreements will be paid, once there’s enough money in the account to do so. You can learn more details about this option at FreedomDebtRelief.com.
Bankruptcy
If all else fails, there’s always filing for bankruptcy protection. Generally speaking, this should be your last resort because of the truly ruinous effect it has on your ability to borrow, get insurance and in some cases even get certain types of employment.
However, things do change and time does keep on ticking into the future, so it will be behind you one day. And, if you can sleep better knowing those debts are settled, this approach to getting out of debt with bad credit might be worth taking for you.
