Some consumers have been facing financial hardship such as the lost of a job, reduced salary, divorce, death or a medical emergency. During these time loans, bills and credit cards can quickly pile up and destroy the consumer’s ability to repay their financial obligations. Not only are these obligations weighting heavily on the consumer, the various credit card lenders are increasing the interest rates and fees on the consumer’s credit cards.

So what is the consumer to do about this situation?  Some of the solutions make sound simply, in a normal economic such as:

• Borrow only what you need
• Pay all bills promptly and more than the required monthly minimum payment
• Understand your credit report
• Recognize financial situations
• Understand the type of loan you are requesting, is it an open credit, revolving or installment loan.  Know the terms and repayment requirements.

One way to reorganize their financial situation is to:

• Call their mortgage lender to discuss a loan modification – This will achieve lower monthly payments
• Order a credit report – The consumer needs to know their credit score and identify any errors.
• If the consumer currently has a good credit score, call the credit card companies to obtain a lower interest rate 

A good credit rating is one of the keys to financial freedom in today’s economic climate.

As a consumer, we need to understand the meaning of the word credit.  Credit is considered as either secured or unsecured monies loaned to you by a lender, in return for future payment.  Lenders or creditors who have advanced to you monies to purchase your home or credit card companies/retail stores  which allow you to charge purchases with the understanding you will pay them principal and interest over a period of time.

A good credit score means you are a low risk consumer while a lower credit score means you are a riskier borrower. Credit scores from the three major credit bureau’s (Equifax, Experian or TranUnion) range from 300 to 850.

However, according to a recent article in “USA TODAY”, lenders are clamping down on credit and credit scores are taking a hit. The lenders are reviewing all of their consumer credit cards and making determinations about who is using their credit cards.  Lenders are closing credit card accounts and lowering credit limits for millions of consumers who have never paid late. When a card is closed by a lender this effects your credit score.

However, maybe as a consumer you had a fair to good credit score.  But do to the recent economic environment you are not able to keep up with your financial obligations.  This is going to affect your credit score since late payments, mortgage modifications and high balances are now taking a bigger toll on your scores. 

So when you are looking at debt settlement program and you are informed that your credit score will take a hit. You credit score may had already taken a hit because of your late payments and too much credit with high balances prior to entering into a debt settlement program.