Can I use a credit card consolidation if I haven’t made payments on it?
If you’re having trouble with your credit cards, then you most likely have a card or two that you haven’t made payments on in a while. These missed payments can have a disastrous effect on your credit score, causing many people to seriously look at their options to get them paid off. Credit card consolidation can be a solution for people who are having trouble paying their credit cards, but is it a good idea to include debts that you have already missed payments on?
The answer depends on how long it has been since you last made a payment and the status of the loan. If you have only recently missed a payment and the account is still held by the original creditor, then credit card consolidation is almost always your best option. In these cases, the loan hasn’t been turned over to a collection agency, but if you don’t do something soon it will. By choosing debt consolidation, you are paying off the loan and creating a way for you to make payments. If a late payment notation is already on your credit report, having the account paid off can help to erase some of the damage.
If the loan has already been “charged off” and/or sent to a collection agency, figuring out what to do becomes a lot trickier. A few years ago, financial counselors urged their clients to get these debts paid off, since it was believed that they would continue to bring down a person’s credit score. Recently, however, some advisors are starting to believe that the charge-off is about the worst damage that can be done to a credit score. To further complicate the matter, many collection agencies don’t remove these accounts from credit reports once they are paid off, giving consumers little to no incentive to pay off balances that will not put them in court.
If you owe enough that a collection agency can threaten legal action, however, it’s probably a good idea to get the debt paid off. Talk to your debt counselor while applying for a debt consolidation loan about your specific situation and work with them to come up with a solution that is right for your budget.