There are some consumers who are aware of certain types of debt that may not show up on their credit report as these obligations are not made available to credit rating agencies and will not necessarily benefit a consumer if they pay these bills on time. As one example, some consumers may have medical debt or other types of loans that may not have been made from a major financial institution, which will not impact a consumer’s credit score in most cases, but consumers need to understand that if they fail to meet these debt obligations there have been recent warnings by financial advisers that a collection agency who may take over the retrieval of this debt could impact a consumer’s credit score in a negative way.
What this translates to for consumers who may have these nontraditional debt sources is that it is just as important to focus on these particular debt obligations as it is to honor credit card debts, personal loans, or a mortgage payment since these types of debt can have a negative impact on a consumer’s credit score and this may lead to higher rates on current lines of credit that are presently available. Some consumers may take out a payday loan, need medical attention and have to finance the repayment of their bill, or there are some cases where consumers may have failed to pay utility or cable bills, just as a few examples, and since some of these types of debt do not show up in a positive manner on a consumer’s credit report, few people realize that if they fall behind on these payments or become severely delinquent, it can come back to haunt them.
However, some consumers get themselves in a position where they simply acquire more debt through both traditional and nontraditional sources than they can handle, and this could begin a snowball effect where these debts could get out of control, be reported to a debt collection agency, and these bills that consumers once thought would not be seen on their credit history have shown up. Consumers do have options though in the form of either a counseling session with a nonprofit credit counseling organization, which may be able to help them better budget so that they can meet their financial obligations, or consumers who are suffering from unforeseen financial hardships may be able to contact these creditors and ask for help.
Obviously, if a consumer has fallen into a position where health problems or unemployment may have caused their financial situation to worsen, talking with creditors about these problems and expressing a willingness to repay their debts can be beneficial for these consumers, as a variety of creditors from both nontraditional and traditional sources may have hardship assistance plans in place to either offer lower monthly payments, debt forgiveness, or may simply provide other solutions that can particularly benefit a consumer’s situation.
It needs to be understood though, certain types of debt will be nonnegotiable and as a result consumers may need to think twice about pursuing certain lines of credit that they may feel could be quick access to cash, since an emergency or the inability to repay these debts could not only lead to higher overall debt repayment costs but do damage to their credit score if these debts go into debt collection and, if a credit score drops for this consumer, other areas of their life will feel this impact as well. However, consumers who are in a position where they have a great deal of debt typically start by either contacting a financial official or making a personal decision as to how they will begin to pay down their debts, as the best way to avoid unforeseen financial problems is to keep debt obligations low, save money that may be used for these emergencies, and implement better financial practices so that consumers will not have to turn to some of these nontraditional debt sources for funds they feel they may need.