Today everyone is looking for a path to financial freedom during this difficult economic climate.  They are looking for ways to safeguard their reputation and keep their buying and borrowing power.

The consumer knows that loans, bills, mortgages and credit card charges can increase very quickly, in particular the credit cards used for day to day expenses, it is a challenge to maintain the monthly payments.  So in order to safeguard the consumer’s reputation and credit score rating, they need to review and relearn ways to protect themselves.

Some of the things the consumer needs to revisit are the following key ideas:

• Am I borrowing wisely and paying back promptly?
• Have I identified, avoided and recovered from various financial pitfalls?
• Have a gotten a recent copy of my credit report and do I understand it?
• Does my family have a financial plan for the future

The key to being a good credit risk is based upon the consumer’s credit score.  This score is a numerical number assigned to the consumer based upon their credit history. This history is based upon number of opened and closed accounts, payment history, including late or missing payments and collection referral, original credit limit, current balances, etc. The higher your credit score is the better your ability to borrow at more favorable interest rates.  The lower the score the consumer is charged a higher interest rate or decline altogether.

Basically, the consumer needs to obtain a copy of their credit report from one of the following three credit bureaus: Equifax, Experian or TransUnion.  Once you have this report, the consumer needs to set down and review this report for accurate information. 

The three major credit reporting services use a numerical range of between 300 to 800. According to John UYlzhelmer, president of consumer education at Credit.com, “A 700 used to be enough to nab the best rates, but now a consumer needs a FICO score of 750.” When the consumer decides to use a debt settlement company one of the issue discussed how this will affect the consumer’s credit score.  In the past, the higher your FICO (credit score) score the better risk you are to lenders.  This score has meant you might be able to get lower interest rates either on your secured or unsecured borrowings. 

Debt settlement is an alternative method of getting the consumer out of their unsecured debt burden.  It is a program what is intended for those consumers facing undue financial hardship caused by the loss of a job, death of a spouse or medical emergency. The debt settlement option which is available to consumers is sometimes considered the last resource before filing bankruptcy. 

However, if the consumer is seeking out a debt settlement program their FICO score’s have already dropped. The drop in score has been caused by late payment, over limit or high balances. In fact, paying off a card and keeping it inactive will not necessary hurt your credit score nor will it help your credit score.  Recent news articles have indicated that lenders are closing or reducing credit limits on inactive or low usage credit cards.  This is also having a negative affect on the consumer’s credit score. 

Whether you use a debt settlement program or you try on your pay down your debt yourself. So either way the consumer’s credit score will be changed over time. The good news is as your debts are negotiated your credit score will begin to improve again.