The dangers of debt consolidation

You may have noticed that interest rates currently are extremely low, but be careful as you just because the interest rates are as low as they have been you should still proceed with caution when trying to consolidate all your higher interest rates debt into one lower one. What looks like a cure for all your debt woes, usually ends up as just a symptomatic relief cure and more often than not you're back where you've started.

There are several approaches people may take to combat their debt and loans, one is to seek debt consolidation loans as previous posts have looked at. Another may be zero balance transfers on credit cards, and others include home equity loans and lines of credit. However, research has shown in America that people who took out home equity loans to pay off credit card debts have ended up with the same, or in some cases a higher, debt loan than when they started off.

The trouble is with seeking debt consolidation, it basically reinforces why you got in trouble to start with as it relies on the same borrowing tendencies that you got into debt with. Effectively adding more fuel to the fire. Plus if you're looking to take advantage of the low interest rates currently offered, with a bad credit score it's more than likely that these interest rates will not be offered to you but higher ones as you're considered too much of a credit risk.

However, if all options have been explored and credit debt consolidation is your option we recommend you do your research thoroughly on the company before comitting to anything. If you're going to take out a home loan you should always read the contract and understand the risks involved - that you could lose your home if you default on repayments. Where possible seek an IVA. Also if you are not a homeowner, and seek a zero percent credit card option, make sure you know how long this interest period lasts for and when the rate jumps back up.

Boosting Your Credit Score

So I'd thought it'd be of some value to expose the myths regarding credit score.
If you're unfamiliar with the credit score, it's a way from lenders to check on your previous credit history so that they can decide whether or not to approve you for a mortgage, home loan, credit cards etc.

A high credit score means that you are a relatively safe risk for lenders, and they'll be more likely to lend you money if you have a high score.

A low credit score, implies that you've got bad credit history and you are seen as much more of a risk. Therefore, lenders may be more reluctant to give you further credit.

Where does your credit score comes from?

A lot of the information on forming your credit score will come from the application form you fill out. It will also come from how you've managed loans in the past, and data from your personal bills will be used (anything from mortgage to phone or utility bills). If you've been bankrupt or had to use an IVA, these will stay on your credit report for 6 years.

Your credit score will be calculated differently by different providers. Points will be assigned based on the information gathers, and your credit score will be a collected tally of all these points.
Your credit score will fluctuate according to your current circumstances. For instances if when you come to apply for credit, you've missed a payment on say your credit card bill then you will get a much lower score than if you haven't defaulted and you come to apply.

If you're preparing for an application, it's worth knowing your score beforehand as you can work on areas you need to perhaps boost in order for your application to be successful.

So here's some useful tips and techniques to boost your score:

• Close any unused accounts. Your current commitments will be based on the amount you could potentially borrow, and not the amount you actually owe.
• Keep up to date on all payments. An obvious one, but you'd be surprised how many people let things slip and then go to apply for credit. So make sure all bills are paid promptly
• Pay attention to joint bank accounts. If you have an account with an ex-partner, then make sure you close it. As your names could be linked on the credit score report, so if you're partner has financial problems, this will affect your score.
  
• Register to vote at your current address. Lenders use this information to provide confirmation that you live where you say you live.
• Check for errors on the form, even minor clerical errors can affect your score. Entering incorrect information will give the wrong impression and change your score for the worse
• Don't lie. For a starters you'll get found out sooner or later by lenders, and it's fraud.
  
• Don't make too many credit applications. Each application that you make is recorded, make too many and lenders thing you're either desperate for money or that your committing credit fraud.

Follow these steps and in no time at all you'll be on your way to a better credit score.
Hope you've found this useful.