Credit debt consolidation, facts versus fraud. With the current "recession"-like economy we are experiencing, reducing our personal debt has become a hot topic for millions of Americans across the country. There are legitimate ways to consolidate debt, and also some pitfalls the consumer must be wary of.

Credit consolidation companies seem to be a dime a dozen, mixed up with credit repair companies. They offer to pay off your creditors and you pay them a smaller amount than what you are currently paying the creditors. Sounds great, but horror stories abound of victims who paid the credit debt consolidation company only to find out their original debts were never paid off. A simple Google search will show many of these stories.

Another pitfall to credit consolidation companies is that some report to the credit bureaus as credit counseling, which in the eyes of a lender count exactly as a COLLECTION. As you know, having a collection on your credit report can disqualify you from certain types of financing, especially mortgage 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.

The way it can increase the credit score is by having only one account with a balance instead of many. This must be weighed against the fact that the debt consolidation account will probably be maxed out, which lowers the score. This must also not be used as an excuse to pay off the credit cards, and then go running up the balances on those now empty-cards again! This is a trap, and it is better to cut up those cards once you consolidate to avoid the risk of getting into even more trouble.

There are many options towards making your amount of personal debt manageable. One of the best sources of advice or information is a mortgage broker or bank. They will be glad to listen to your story and suggest a plan to make your debt payments manageable and possibly avoid a disastrous situation such as a collection, foreclosure, or bankruptcy. Consolidating your debt can be a life-saver!

BlueWaterArticles.com: - Credit Debt Consolidation Facts Vs Fraud

About the Author

It's no secret that millions of people are literally drowning in debt, and many are desperate for solutions to salvage their finances. Not surprisingly, they are drawn to television and Internet ads and articles offering free information on debt consolidation.