When you are absolutely bogged down with your burdens of credit and financial worries, the only question that crowds your thought is- how to get out of debt without hurting your credit score? As you already know, credit score is very important to keep up your reputation in the world of finance as this is the first thing that a lender would look at before he lends you money. Being a defaulter surely damages your credit ranking and if you fail to make your payments on a regular basis, your score drops very low. So, the trick is to keep your repute and get rid of your debt.
Some of the options to get out of debt without hurting your credit score are discussed here.
Credit Counseling: Credit counseling in many cases is found to be the only alternative to filing bankruptcy. It not only puts an end to your financial worries, but also helps to rehabilitate your credit score damages. The credit counselor asserts you to take control of your finances and eliminates your debt with the help of a successful and effective Debt Management Plan (DMP).
The credit-counseling agency will examine your credit condition and teach you various skills of managing money. Debt Management plan will be structured based on your monthly income. It will then be sent for approval by each of your creditors and once they agree to the proposal, you begin making payments to the counseling agent who then distributes the sum to each creditor in agreement with the plan. This is an effective way to get out of debt without hurting your credit score.
Debt consolidation: A debt consolidation program ensures reduction of rate of interest by finding the middle ground with your creditors and forms a debt repayment plan by consolidating all your credit card debts into a simple monthly payment.
Self-repayment plan: This allows you to get out of debt without hurting your credit score, without any professional help. However, to be successful you have to be committed to your purpose and maintain a tight budget.
Debt settlement: In this method, the settlement advisor or company sets up contacts with your creditors on your behalf and works to reduce your outstanding debts by 40% -60%. They make an offer and if it is accepted you make monthly payments to the debt settlement company till insufficient funds are deposited to cover the company's fee and the debt. However sometimes this is not a very safe option to get out of debt without hurting your credit score as while you are paying your settlement company, your creditors can report you as a defaulter.