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Jennifer Says “We Have Accumulated So Much Debt And Bad Credit. What Do We Do?”

“Dear Steve,

We have accumulated so much debt our credit score is to low to even buy a house. I’ve been looking into different programs to help, unfortunately the charge money I can’t afford either, we have to do this on our own.

If a creditor is offering to let you pay over 4 payments and only 55% of what you owe is this going to help our credit or hurt it more


Dear Jennifer,

To get out of this situation it is going to wind up costing you something. You’ll either pay for a professional to manage your debt recovery, like in a debt management program, or, like many, you’ll try it on your own and make costly mistakes. Either way, you wind up paying.

Let’s see if I can’t create an inexpensive way for you to deal with this situation.

My first recommendation is going to cost you a little but I want you, using this link, to get a consolidated credit report and get the credit scores at the same time. This consolidated credit report is the best I know of and when you purchase it with the credit scores it will tell you exactly what you need to do to increase your credit scores. It is a small price to pay for very specific and direct information that will give you the exact guidance you need to increase your credit scores.

Your statement about repaying a debt for less than you owe is actually a form of debt settlement. The amount of debt forgiven is reported to the IRS and you may have to pay income tax on that forgiven debt. Read Beware of the IRS if You Settle or Default on a Debt. However, because it is a creditor that will allow you to pay it over four payments it makes it sound like this is a relatively small debt.

The forgiven debt is also reported on your credit report as a bad debt so while it gets you out of debt, it does not address your number one goal of increasing your credit score. If your number one goal is to increase your credit score then maybe you’ll want to repay the debt in full if you can afford it. That will then show the debt was delinquent but satisfied rather than delinquent and part written-off as a bad debt.

My second recommendation would be that while you are using the specific steps in that consolidated credit report I recommended I would urge you to consider getting a secured credit card that reports to the credit bureaus. You see, addressing your old bad credit is one step but if you are going to improve your credit report, better and faster, we also need to get new good information on there as well. These credit cards for people with poor credit will help you do that.

My final recommendation is for you to download my free book, Eliminate Your Debt Like a Pro and follow the advice and steps in there.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


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