The whole process of Credit Repair can be easily misunderstood.   There are a plethora of online companies advertising they can increase your credit score by 100 points or more in a few months. Realistically, credit repair can be a rather extensive process taking over a year in some cases to complete.   Determining factors in successful credit repair include and are largely dependent on the types of debt you are facing, the amount of delinquent accounts, the balances owed on those accounts, and the collection stage you are in.  An additional consideration is how long the accounts have been delinquent.

Credit card and other unsecured debts are typically some of the easier debts to remedy. You can remedy these by settling them at a reduced pay-off, consolidation, or filing bankruptcy. Once you are delinquent on account you can generally start settlement discussions with your debtor. You can hire a professional to do this on your behalf or if you are really savvy, you can try to resolve them yourself. Obviously this option of settlement (also referred to as an offer in compromise) requires some available capital to resolve the debt in full when a settlement amount is agreed upon.  It is clearly not a viable option for everyone but it is for those people who have that option, it can be a very good way of reaching a settlement with some lenders for pennies on the dollar at times.

Consolidation is the least attractive option to resolving credit debt. There are two different consolidation strategies that are most commonly used. You can take out a new loan or line of credit which may reduce your interest rate by a nominal amount but you still owe 100% of the debt. The other way is to employ a company that pays off the credit cards for you and you in turn, pay them until the debt it paid off. With this scenario, however, the company you retain to pay off your debt often times settles your debt at a lessor amount and keeps the difference.

Bankruptcy is a final, sometimes good option, but it is recommended if it is your ONLY option! A Chapter 7 bankruptcy can wipe out credit card debt, hospital bills, etc.  A Chapter 13 bankruptcy requires you to pay back a portion of your debts.   It is seldom in our practice we are not able to come up with an alternative for our clients considering bankruptcy.

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