However, while Freedom Debt Relief is legitimate, it's important to carefully consider the potential downsides of using a debt settlement program. The process can negatively impact credit scores and may involve significant fees.
You'll typically need good credit and income to take out a debt consolidation loan or balance transfer credit card, for example, while most debt settlement companies require you to enroll at least $7,500 or $10,000 of debt to qualify.
The short answer is yes, credit card debt forgiveness can negatively affect your credit score. However, the impact depends on various factors, including your current credit score and the specifics of your debt settlement agreement.
A stable income is crucial for qualifying for a debt consolidation program. Lenders need assurance that you can commit to regular monthly payments throughout the term of the loan. As a result, you'll likely need to verify your income by providing recent pay stubs, tax returns or bank statements.
There's no universal minimum credit score requirement to get approved for a consolidation loan. Some lenders are even willing to work with bad-credit borrowers. That said, a lower credit score typically translates to higher interest rates and fees, which can make debt consolidation less viable.
Freedom Debt Relief is a legitimate debt settlement company founded in 2002. It's accredited by the Better Business Bureau (BBB) with an A+ rating and holds an accreditation from the American Association for Debt Resolution (AADR).
So, while you can use your credit card accounts after consolidating your debt in most cases, it could be a bit more difficult to open and use new credit cards — and the route you take to consolidate your debt could play a role as well. Learn how the right debt relief strategy could help you now.
Stopping payment on a debt means you could face late fees and accruing interest. Additionally, just because a creditor agrees to lower the amount you owe doesn't mean you're free and clear on that particular debt. Forgiven debt could be considered taxable income on your federal taxes.
You may be eligible for income-driven repayment (IDR) loan forgiveness if you've have been in repayment for 20 or 25 years. An IDR plan bases your monthly payment on your income and family size.
To be considered for debt consolidation, you must have an income and be credit worthy. Why should I consolidate my debt? Debt consolidation won't take away your debt, but it might make managing your debt easier. Paying a single loan instead of several means you only have one to repay with one interest amount.
Freedom Debt Relief Eligibility & Requirements
First off, you need at least $7,500 in unsecured debts to qualify for Freedom Debt Reliefs debt settlement program. Unsecured debt means credit cards, personal loans, and medical bills. It's debt not backed by collateral.
Will likely hurt your credit score: Like with any debt settlement company, working with Freedom Debt Relief will typically make your credit score drop at first. Depending on your situation, it could be a significant tumble.
Generally, if you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
Perhaps the most common debts that cannot be discharged under any circumstances are child support, back taxes, and alimony. Here are some of the most common categories of non-dischargeable debt: Debts that you left off your bankruptcy petition, unless the creditor had knowledge of your filing. Many types of taxes.
Duration on your report: Debt settlement can stay on your report for up to seven years. Debt settlement occurs when a company contacts creditors and negotiates a settlement on your behalf. The debt settlement company may ask you to stop paying your creditors and instead pay an amount into a separate account.
If you're one of the millions of Americans struggling to repay high-interest debt, a debt relief plan may be an option to help you get your finances on track. But it's not a quick fix. It's a long-term solution designed to help you get out of debt over a period of time — typically several years.
Can you keep a credit card on a debt management plan? The good news if you're concerned about closing all your cards is that you may not need to lose all of them. In many cases, you can keep one card out of the program for emergencies or travel. You also generally do not need to include business credit cards.
The short answer is no, settling your credit card debt (also known as credit card debt forgiveness) will not directly improve your credit score. In fact, the process of settling debt can initially have a negative impact on your credit score.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
National Debt Relief provides the most comprehensive debt relief tools of any company Bankrate reviewed. In addition to its Whole Human Finance debt relief program, it offers credit counseling, bankruptcy guidance and even debt consolidation loan options through partners.
Do You Have to Pay Back Freedom Debt Relief? Freedom Debt Relief doesn't charge upfront fees, but you'll pay a fee of 15% to 25% of your enrolled debt if a settlement agreement is reached.
Consolidating debts may temporarily reduce your credit score, but your score will improve over time as long as you make payments on schedule. You can minimize the impact on your credit through strategies like keeping credit lines open and avoiding new debts.