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Here are the facts of credit debt consolidation and compare it to the frauds! With the current downturn in the economy that we have all been experiencing, reduction of personal debt is of course a hot topic for most Americans across the country! While there are some pitfalls to be concerned about, there are a lot of legitimate ways to consolidate debt.

Credit consolidation can seem like the perfect solution to those who are in debt. These companies have popped up everywhere as have credit repair companies. It all sounds so good. The company rep tells you that you'll pay them a smaller amount than what you're currently paying out every month to creditors, and then they'll use your money to reduce your bills. However, if you run a Google search about the credit debt consolidation industry, you'll find a multitude of sad stories from folks who paid the company and then found that the company hadn't applied anything towards their debts.

Some credit consolidation companies will show up in a credit bureau report as credit counseling, which is disadvantageous. From a lender's perspective, this looks just like a collection. This might disqualify you from mortgage financing, among other kinds of financing.

Credit debt consolidation does exist in legitimate forms. Getting a home equity line of credit or a cash out refinance and two very legitimate ways to do this. Another form is to open up a new credit line such as a credit card, with a zero percent balance-transfer option, and roll all of the existing credit card and other debt into this account. This will have the effect of lowering the effective interest rate for a while, sometimes over a year, and can increase the credit score.

One way in which you can increase your credit score is by only having one account with a balance instead of several. However, one must choose carefully, because the account where you consolidate your debt will be potentially maxed out, which will lower your score in the beginning. This also should not be used as a way to pay off several credit cards, only to go spending on these cards once more. Instead, it is better to cut up the empty cards after consolidating in order to avoid even more financial trouble.

There are many ways to manage your personal debt. You should talk to a bank or mortgage broker for more information or advice. They will listen to you and help you devise a plan to keep you from suffering collection, bankruptcy, or foreclosure by making manageable payments on your debt. Debt consolidation can be a literal life saver for many debtors.