Yes, joining the National Debt Relief program (or any debt relief company) can negatively hurt your credit score. When we ran a debt settlement credit score impact simulation, we estimated that a 730 credit score would go to a 535 credit score. This is just an estimate, but it's helpful to consider.
If you are sinking in debt, seeking debt relief can help get rid of debt, take the weight off your shoulders, and give you a fresh financial start. But are there downsides to debt relief? There are a lot of misunderstandings and misconceptions surrounding debt relief options. Today, we focus on whether National Debt Relief can ruin your credit score.
When you reach out to a debt settlement company like National Debt Relief to help negotiate your debt with your creditors, it could affect your credit score. Read on to understand how National Debt Relief can ruin your credit score, and to see suitable alternatives that will barely affect your credit score.
Loans can help you invest or buy a property when you don't have enough at the moment to take advantage of the opportunity. While we all take loans with a solid repayment plan, sometimes things don't go as planned. You might lose your source of income, which could affect your ability to repay a loan.
After taking a loan and losing your income, you could get worried about your ability to repay the loan. In this case, it is important to consider debt relief options, like debt settlement. While debt settlement could help you get rid of your outstanding debt, it can ruin your credit score. We have discussed other suitable alternatives which can help you get rid of debt without lowering your credit score.
One of the biggest things to consider is National Debt Relief's fees. I explain in the video below how many debt relief companies discuss fees, so it's really important to understand how much you are paying as a percentage for this service. So, consider taking the debt settlement cost and duration calculator below and compare that to the National Debt Relief quote you received.
So, if National Debt Relief just told you that the fees are included in the plan, consider taking the debt settlement cost and duration calculator below. The calculator will help you estimate your cost and duration for a debt relief program.
National Debt Relief is a debt settlement company that helps debtors settle their debts by negotiating with creditors. When falling behind on debt, you can contact them to help with your debt repayment. After explaining your situation, they will ask you to stop making repayments to your lender. Instead, they will give you new Escrow account details where you will be channeling your payments.
The main reason they ask you to withhold payments to creditors is to make your creditor desperate and open to negotiations. If you have always made your repayments on time and as agreed when taking out the loan, not making payments will affect your credit score negatively.
Once you have made substantial payments to the recommended Escrow account, the company, National Debt Relief, will reach out to your creditor. They will negotiate the loan and offer to pay a lower amount as a lump sum with the funds from your Escrow amount to clear the loan.
Should the process be successful and your creditor agrees to the lump sum amount, the company will deposit the contributed funds into the creditor's account. The company will also take a percentage of the money to pay for their services.
National Debt Relief is popular among other debt settlement companies, and their ratings on Trustpilot are decent and impressive.
Although debt settlement is a debt relief option, it will negatively affect your credit score, a downside that most companies don't disclose. Therefore, if you would like to pay off your debt through debt settlement, you need to be aware that your credit score will get hurt.
But why?
Here is how debt settlement negatively affects your credit score:
When you reach out to a debt settlement company, they will ask you to cease making payments to your creditor. Usually, you will need to miss out on payments for at least four months. The missed payments will be reported by your creditor and will thus reduce your credit score.
Therefore, if you have been keeping up with your payments, it is wise to consider another debt relief option to avoid hurting your credit score. It will also help avoid a missed debt listing on your credit report.
If the debt settlement company negotiates successfully and your creditor agrees to settle, they will write off the debt. So, the debt will not be listed as unpaid or delinquent in your credit report. However, the debt will be indicated as forgiven, which will lower your credit score.
So, it is important to consider other debt-relief options before moving forward with debt settlement. If you have a little income that you can use to make partial repayments, consider discussing an alternative repayment plan with your creditor. Most lenders are willing to adjust their client's repayment schedules depending on their financial situation.
Will National Debt Relief Ruin My Credit Worse Than Other Debt Settlement Companies?
When looking for a way out of debt, you want a fresh financial start, preferably one that won't hurt your credit score. So, it is important to choose an option that won't ruin your credit.
Unfortunately, most online reviews claim that working with National Debt Relief will harm your credit score. This is false. Every debt settlement company works the same way, and the results are similar, which include a damaged credit score. Therefore, your credit score will be affected regardless of the company, provided you are seeking debt settlement services.
Luckily, there are other debt-relief options you can explore other than debt settlement. Although these options may harm your credit score, the effects are minimal compared to debt settlement. They include:
Unknown to most debtors, creditors are always willing to hear you out and help you find a way to continue making your payments. It is important to discuss your situation with your creditors before defaulting on your payment.
You can let your creditor know about your position, e.g., sudden loss of income, and ask them if they would be open to a new repayment plan. Most creditors will accept it to ensure the loan gets paid and won't harm your credit score.
What is your current financial situation? If you have some disposable income after paying your monthly expenses, consider debt management to repay your debts. In debt management, you will work with a financial counselor who will help you organize your finances to ensure there is enough to continue servicing your debt. Besides being up to date with your payments, you will feel more confident and get advice on improving your financial situation.
Have you exhausted all your options for generating income? If you can, try to secure a second or part-time job to earn more and repay your debts. Alternatively, you can organize a yard sale and sell items or clothes you no longer use. The additional income can help repay your loans and avoid default, thus, maintaining a good credit score.
If you are feeling overwhelmed and don't know what step to take next regarding debt, we can help. Call us today, explain your situation, and let us advise on the best option for you. You can also consult us about various debt options you may be considering, and we can advise accordingly.
