If you need help getting out of debt, you are not alone.Although signs show an upturn in the economy, many Americans are deep in debt, and not everyone can work overtime or a second job to pay down that debt.However, you aren’t taking on new debt and, assuming you have a new credit card, you are likely increasing your available credit.This should decrease your total balance-to-limit ratio, which may increase your score.Your FICO Score is made up of five factors: payment history, amount owed, age of credit history, types of credit used and inquiries (applications for new credit).35 percent of your score is determined by payment history: whether you pay on time and whether you have had bankruptcies or judgments against you. 15 percent is determined by the age of your credit history.10 percent is determined by the types of credit you have. Consolidating debt can adversely impact your average age of credit (15 percent of your score), your inquiries (10 percent of your score ) and total amount owed (30 percent of your score).30 percent of your FICO score is determined by your debt-to-credit ratio, or the amount of money owed.
Since 1999, FICO has ignored any credit-counseling information when calculating a consumer's credit score."Frankly, we think consumers who participate in credit counseling shouldn't be punished in their FICO scores," says Craig Watts, public affairs senior manager for Fair Isaac Corp."Some creditors may see that a person is in a debt-management plan and decide that they have all the debt they can handle," says Maxine Sweet, vice president of consumer affairs for Experian. Those negative marks hurt your credit score and can mar your credit report for up to seven years.
What is really sad is the baby boomers who have their dream house, hardly any bills at all and 1 of the 2 of them have no job. They have perfect credit just below 800 and are stuggling to pay the house payment on time to keep their credit perfect in which they have worked for years to achieve.
The feds need to come up with a "bail out" for those who have never been late on a payment and are having to draw from their 401K to meet their monthly bills.
A debt-management plan usually lasts three or four years.
A comment stating that you're paying an account through a credit-counseling agency appears on your credit report and remains until the account is paid in full.