What happens to my credit score after a debt consolidation?

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For some reason I was not able to keep paying my credit cards and I got a debt consolidation agency to take care of them, they consolidated my credit and I am on monthly payments for 2 years, my credit score went down to 555. I have a mortgage and auto loan that I have been good with (no payments 30 days late) I am about to be done with the consolidation payments. What is gonna happen with my credit score? Is it going up right away after those credit cards appear paid off? What would be the best way to bring my credit score up?

  1. Reply
    Rick B
    May 4, 2011 at 3:44 am

    Most consolidation comapnies mess up your credit. They hold off on payments, then try to negotiate down the companies. HORRIBLE IDEA!!! That is why Dave Ramsey calls them Debt CONsolidation companies. They are cons.

    The best way to improve your score is to be patient and pay on time every time. No magic. No secret.

  2. Reply
    May 4, 2011 at 4:29 am

    If the company you hired is one of those that promised to cut your debt in half, then you need to understand how these firms work. These programs involve deliberately ceasing payments to all your creditors to force your accounts into default to attempt settlements for less. The monthly payments you make go towards building a settlement account and to pay the firm’s fees. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating.

    Sometimes the process works and your creditors do settle for less…You will still have damaged credit anyway…your credit score won’t zoom up instantly the second you complete the program

  3. Reply
    May 4, 2011 at 4:51 am

    Is this a debt management program? If so, while you are in the program, it is noted on your credit file. That would cause the lowering of your score. When you complete the program, that notation will be removed. Your credit report should reflect consistent, on time payments for those credit cards for the past two years and your score should improve.

    If this was some kind of settlement program, your score won’t be helped at all when you complete the program.

  4. Reply
    May 4, 2011 at 5:01 am

    Well, first congratulations on getting close to finishing your consolidation program. Your score won’t go up very much when you are finished. What will help your score is time. The fact that you have a current mortgage and auto loan is awesome and they are your saving grace. Because you have these accounts, you are able to continue to show credit-related accounts aging on your reports. Finally paying things off in full isn’t what matters, it’s the journey (monthly payments) that matters.

    Perhaps in about a year, you’ll be approved for a secured credit card. It’ll probably be the only way to prove to a card issuer that you can be trusted with a credit card again.

    In two, maybe three years, your score will likely be in the 700s.

  5. Reply
    R. MAK.
    May 4, 2011 at 5:19 am

    Debt consolidation will improve your credit score only if you become regular and payoff the monthly installment on time. According to Fair Loan Rate.com

    “As mentioned above once you start making payments on your amount your credit scores automatically boosts up as if you had let your credits spin their own web, things would have gone nasty, so much as to you might fall into bankruptcy. Claiming bankruptcy could harm your credit score for the next 20 years making you unable to take a loan or ask any funds from banks or creditors for any purpose. You would have to start from zero, something which we aren’t fond off.”

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