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It's easier to get out of debt with a good credit score

[Sep 4, 2010.]

 

Why a good credit score helps debt relief

Good credit is an advantage to anyone who is trying to get out of debt. Working with lenders got you into debt, and working with lenders will help you find debt relief. Lenders love an excellent credit score. It means you pay your bills on time. Lenders will be much more willing to assist you if your record shows that you are trustworthy.

Here are the top three debt consolidation methods preferred by many consumers. To get the best interest rate and terms on any of these three, you need good credit.

  • Cash out refinance mortgage or second mortgage
  • Debt consolidation program
  • Debt settlement program

Each of these methods has its advantages. Not all consumers are in the same position, so each method serves a different need. For example, you must own a home and have a strong equity position to do a cash out refinance or second mortgage. If you don't own a home, the first method would not be an option. Getting the best terms on a debt consolidation loan requires good credit. Even if the lender is writing down your debt, as with a debt settlement program, good credit is a strong advantage.

3 ways to improve your credit score

  • Fix the errors
  • Limit the number of inquiries
  • Improve balances and history

Get a copy of your credit report and identify anything you are confident is an error. Collect any supporting documentation you have to prove your case. Then, contact the lender and ask them to fix the error. You MUST get a letter from the lender stating that an error was made and is being corrected. Keep the letter in a safe place, because errors tend to pop up again and again.

Do not apply for more credit. Even if you see the most tempting credit card offer, resist. Every time you allow a company to pull your credit report, it drops your credit score. It also sends the wrong message to the lenders you are trying to work with for debt relief.

As you de-leverage, make all payments on time. You will find that within a year, the reduced balances and steady payment history will bring up your credit score.

Debt relief can become a reachable goal if you shop for lowest refinance rates and the best debt consolidation programs.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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