Effect Her Credit.
Q: Well I have a quick question maybe someone can help me with. My girlfriend has about 6 different credit card bills that she racked up when she was younger. She is now at the point where she would like to possibly consolidate all the debt and pay a low monthly few. She called a debt consolidation company and they said this does not effect her credit. I heard from a good friend that debt consolidation of credit cards will ruin her credit for 7 years?? Is this true.Also if this is the good thing to do can anyone suggest a reliable debt consolidation company I can set her up with. Also if this isn't the best thing to do for her what is?
A: -What to do depends a lot on the interest rates and the balances, and how much money she has for debt retirement each month. She probably gets 20 or 30 preapproved credit card applications in her mailbox each month. Find the one with the most generous balance transfer terms (0% or 1% interest for the first 18 months, little or no transfer fee, etc.) and transfer the big high-rate balances onto the new card. Do not actually use that new card for purchases until the transfer balance is paid off, and make sure she pays at least a week early every month. (if she's ever a day late with a payment, the rate may jump to near 30%. If she pays just barely on time, they may hold the payment until it's a day late). Make small payments on the accounts with low interest rates (unless the balance is low and can be paid off quickly) and make big payments on the accounts with high rates. When the introductory rate is about to expire, hopefully it'll be almost paid off, but if not she can apply for a new introductory card and play the same game again. Cut up the cards as they are paid off or transferred, and close some of the accounts. That's my system anyway. -It depends. If she uses a service to consolidate and make a payment plan, that is like dropping a nuke on your credit file. It is just like a bankruptcy. If you use a home equity loan, then your credit file is likely to improve since secure debt looks a little better than credit card debt. The problem with doing a consolidation is that it often frees up the credit cards so she can rack up a whole new set of bills. Then she is in even worse condition back in the same spot of massive credit card debt, plus the consolidation payments, and now being out of options. The question boils down to her behavior. Has she stopped spending? If so, then a consolidation might work for her. If she has not broken the spending habbit, then a