Credit restoration vs. debt management Sherene Costanzocredit restoration, debt management, credit scores
There are television and radio commercials everywhere for debt
management companies. Can these companies actually help? What can
they do for individuals drowning in debt?
A debt management company, also known as debt consolidation or
debt settlement companies, helps individuals who are currently
buried in debt and cannot seem to dig themselves out. The hole
seems to be getting deeper and deeper. The late payments and
interest payments are stacking up higher and higher. This is when a
debt management/settlement company may be helpful. These companies
may help bring an individual's bills under control; however, these
companies do not help improve an individual's credit score, and
they will usually make the score worse. Once the debt is paid off,
improved credit behaviors over several years will finally help
increase the score. Although, let's not forget to mention the
negative marks these companies help place on their client's credit:
They will remain on clients' credit reports for seven years. This
makes it difficult to be approved for new credit in the future. So,
make sure debt management is your last resort before allowing it to
destroy your credit rating. As with every business, it is important
to shop around for a credible debt management company. Be sure to
research before settling for just any company.
If an individual's outstanding debt is considerably high, one
might want to consider speaking to a bankruptcy attorney before
signing on to a debt management company. They will then be able to
determine which alternative is best for their situation. However,
avoiding these alternatives, if at all possible, is beneficial to
an individual's credit rating.
So, if debt management companies can't improve your client's
credit score, what should they do? Who can help them?
This is when a credit restoration company can help. A credit
restoration company does not focus on managing debt or paying off
bills. The main focus of a credit restoration company is to
increase individuals' credit scores as well as their credit
behavior in order to improve and maintain their score indefinitely.
A credit restoration company may help increase individuals' scores
within 30-90 days and enable them to qualify for the loan they
need. However, it is extremely important for individuals to be
educated regarding their credit and improve their credit behavior.
Many credit restoration companies will implement education on
credit behavior for their clients. In other words, by using a
credit restoration program, clients will benefit from an improved
score, as well as gain knowledge about obtaining and maintaining
excellent credit. It is somewhat of an educational course that
should be required in high school and college. Eighty percent of
Americans would be in a better position now had they taken Credit
101 during their school days, but instead, students are being
bombarded by credit offers from every angle. It is beneficial for
anyone with a low credit score to take advantage of what a credit
restoration company can offer.
Just remember that when you are considering a credit restoration
company, make sure it is a reputable one that will not only improve
your credit score, but also educate you on how to maintain and
further improve that score in the future.
Sherene Costanzo is vice president of Credit Consultants
Inc. She may be reached at (888) 522-7007 or e-mail