How Debt Settlement Can Kill Your Credit Score

Q. I'm a recent college grad with about $12,000 in credit card debt. I haven't been able to make payments in months as I have been bouncing from temporary job to temporary job. I was wondering if you could suggest a good debt consolidation firm. I am starting law school next year and won't be able to work for at least the first year. So, I'm hoping to consolidate my debt into the smallest payment possible while I'm still in school. –Kelly

A. Hi Kelly. I’m sorry to hear about your credit card debt. I know there’s little comfort in this but you are not alone. A recent study commissioned by TrueCredit and performed by Zogby International shows that about 10% of college grads left with more than $10,000 in credit card debt. You can see the survey results here.

Here’s the deal…consolidating is simply taking out a loan to pay off loans. You’re borrowing from Peter to pay Paul. The only value to doing this is if you get better terms with the consolidation loan. You can certainly take a shot at it but you’ll have to qualify for the loan, which means credit and income. Since this is going to be an unsecured loan you will have to have good credit and a decent income because you’re asking for such a high amount.

We do an enormous number of personal loans each month at www.Credit.com so please feel free to head there and shop around for a deal that works for you. -J.U.

Q. I have 10,000 balance on one cc. It is maxed out. I have 2 cc's with no balances on them. I want to know should I transfer some of my debt to the other cc's in order to raise my credit score, so I am not maxing out the one cc?? –Kimberlee

A. Hi Kim – Nope, bad idea. Watch the Web Extra from the Sept 10 show. We dig deeply into doing just that. You still have the same overage usage percentage because you haven’t reduced your total amount of credit card debt. And, you’ve just damaged your scores because now you have three credit cards with balances instead of just one.

Can I kindly suggest that you work on paying down that $10,000 balance instead of trying to move it around? -J.U.