Connect with us

Business

3 Impacts Of Debt Settlement On Your Financial Life

3 Impacts Of Debt Settlement On Your Financial Life

Generally, agreeing to a debt settlement package with your creditor can negatively affect your credit score. In fact, depending on whether you have previously defaulted on payments you will immediately lose a minimum of 50 points on your credit score. This blemish on your financial record will remain with you for at least 7 years.

When you propose a debt settlement plan to your creditor, you are asking your creditor to accept less payment than what you borrowed. Although, this may help relieve you of your financial obligation to your creditor, the consequences as mentioned above are dire.

It is important to know how to get out of debt without negatively affecting your credit score. It is advised to talk to an accredited credit counselor to get good advice.

3 Impacts Of Debt Settlement On Your Financial Life

Below are 3 effects debt settlement can have on your financial life.

Defaulting and Late Payments

More often than not, by the time you begin contemplating debt settlement, your credit score is already quite damaged due to late payments on your debt.

The defaulted or late payments can drop your credit score by up to 200 points and by no less than 50 points. Even if you manage to pay the debt your credit score report will still reflect the payment as “paid” and not the normal “paid as agreed”.

Paying your debt as agreed will do less harm to your credit score, but it will still leave your credit report tainted for at least 7 years.

Negotiating for Paid in “full status”

If you or the debt settlement company represented by the officer acting on your behalf negotiates for a “paid in full” status with your creditor, this would be a wise thing to do.

However, your creditor is under no obligation to agree to these terms. The creditor will usually agree because they don’t want any more hustle and would rather be done with the arrangement as expeditiously as possible.

Removing an Old Debt Settlement Arrangement from Your Credit Report

Sometimes, after you have paid your full debt as agreed with your creditor, and after 7 years have elapsed, your credit score may still reflect your debt settlement status as not yet updated.

In this case, you need to get this omission corrected. There may be two reasons why your credit score is not updated:

  • Negligence on the part of the credit reporting agency.
  • The lender did not discharge the debt properly.

The best remedy for this is to ask for a credit report six months after you have made full payments in order to verify that everything is ok with your credit score.

Debt settlement may not be an ideal choice for setting your debt, considering that it will damage your credit score. However, if you can get a debt settlement accepted by your creditor, it may be a better option than declaring bankruptcy or having your debt sold to a third party that will demand full payment.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Posts

Tips On Preventing Accidents In The Workplace and Keep Your Employees Safe Tips On Preventing Accidents In The Workplace and Keep Your Employees Safe
Business23 hours ago

Tips On Preventing Accidents In The Workplace and Keep Your Employees Safe

Preventing accidents in the workplace is both the moral and ethical responsibility of every employer. Knowing that there’s a safety...

4 Surprising Ways SaaS Can Be A Game Changer For Small Business 4 Surprising Ways SaaS Can Be A Game Changer For Small Business
Business2 days ago

4 Surprising Ways SaaS Can Be A Game Changer For Small Business

The World Wide Web will never run out of tips and strategies on how to grow your business. These days,...

Understanding SaaS, PaaS, IaaS Prior to Selecting One For Your Business Understanding SaaS, PaaS, IaaS Prior to Selecting One For Your Business
Tech1 week ago

Understanding SaaS, PaaS, IaaS Prior to Selecting One For Your Business

Summary: Cloud Computing is rising at a faster pace, and it’s crucially important for organizations to move to the Cloud...

5 Tips to Avoid Federal Tax Penalty For Taxpayers 5 Tips to Avoid Federal Tax Penalty For Taxpayers
Finance2 weeks ago

5 Tips to Avoid Federal Tax Penalty For Taxpayers

When you are undergoing a tax issue, then it is vital to have knowledge of what are you up against...

Hygienic Cleaning Tips Before Moving Into A New Home Hygienic Cleaning Tips Before Moving Into A New Home
Home Improvement2 weeks ago

Hygienic Cleaning Tips Before Moving Into A New Home

Buying a new home during a pandemic is not only a financial challenge but a sanitary concern. Namely, before you...

Spy App For Android A Tool For Keeping Workplace Spy App For Android A Tool For Keeping Workplace
Tech3 weeks ago

Spy App For Android A Tool For Keeping Workplace

Dealing with routine matters has been a lot easier and stress-free thanks to modern technology. Want to order food, use...

How to Create A Backyard Zen Oasis How to Create A Backyard Zen Oasis
Home Improvement4 weeks ago

How to Create A Backyard Zen Oasis

The lifestyle of the modern era usually depletes one’s energy by the time they get home from work. Whether or...

Mistakes You Need to Avoid When Preparing Your CV Mistakes You Need to Avoid When Preparing Your CV
Education4 weeks ago

Mistakes You Need to Avoid When Preparing Your CV

Writing a CV can be hard. You have to somehow condense all your experience into 1 or 2 A4 pages....

Home Decor Trends For 2021: What You Can Expect Home Decor Trends For 2021: What You Can Expect
Home Improvement4 weeks ago

Home Decor Trends For 2021: What You Can Expect

This year, the Covid pandemic has had a huge impact on many different industries and sectors and one which has...

5 Ways to Protect Your Teeth This Christmas 5 Ways to Protect Your Teeth This Christmas
Health1 month ago

5 Ways to Protect Your Teeth This Christmas

Christmas is just around the corner and the preparations are well underway for the festive day, even if it is...

How to Create A Referral Marketing Program In 6 Easy Steps How to Create A Referral Marketing Program In 6 Easy Steps
Marketing1 month ago

How to Create A Referral Marketing Program In 6 Easy Steps

You may have heard of the benefits of a referral program. Besides helping you attract more traffic to your website,...

5 Important Web Design Considerations to Make For Better SEO 5 Important Web Design Considerations to Make For Better SEO
Tech1 month ago

5 Important Web Design Considerations to Make For Better SEO

Ever since the birth of search engines, practices in optimising websites for better search rankings have changed considerably. Where it...

4 Reasons For Your Teeth Becoming Sensitive 4 Reasons For Your Teeth Becoming Sensitive
Health1 month ago

4 Reasons For Your Teeth Becoming Sensitive

Having sensitive teeth can be a common issue for many, but it can also be a sign that you have...

How To Keep Your Business Clean & Sanitised How To Keep Your Business Clean & Sanitised
Business2 months ago

How To Keep Your Business Clean & Sanitised

If your business offers any kind of public-facing services, then you will likely be thinking a lot more about the...

The Impact Of Covid-19 on Commercial Property The Impact Of Covid-19 on Commercial Property
Business2 months ago

The Impact Of Covid-19 on Commercial Property

The lives of people all over the world have been completely altered as a result of Covid-19, with businesses struggling...

Categories

Archives

Trending