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.
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.
Cozy Home Office Setup Tips For 2021
Whether you work from home or have set out a place for something you like such as crafting, studying, or...
Garden Party Ideas For Everyone
No one can make “a perfect’’ garden party, but we are all able to throw an amazing one. Of course,...
How To Find Low Competition Long Tail Keywords Using Free Tools
Keywords are the most fundamental and highest ROI activity when it comes to SEM and SEO. Having the right keywords,...
Top Tips For Healthy Family Meals On A Budget
A healthy diet is not very difficult to follow since there is a lot of information available on the Internet...
Tips For Your Morning Skincare Routine
Keeping your skin healthy can come down to numerous things. A healthy diet will be a good start in keeping...
How to Make SEO Work For You and Your Business
The world of search engine optimization has changed a lot, but certain fundamental principles like focusing on target keywords to...
How to Increase Your Vegetable Garden Yield This Year
If you are going thru the effort of planning, planting, caring, and growing your plants, you naturally want to get...
Why Families Benefit From A Family Dentist When Dealing With Oral Health Issues
Oral Health issues can be a source of conflict and stress in families, especially in families with young children. Not...
What Type Of SEO Is Effective?
Every business knows that it takes a huge amount of time and money to maintain a website. However, no one...
4 Reasons to Replace Your Car’s Engine With Performance Parts
Performance parts are the best kind of upgrades you can make to a car. Performance cars have a higher price...
Maximum Power: Update Your Old House For Modern Electrical Needs
An outdated electrical system can wreak havoc on your energy bills and greatly increase your risk of structural damage. If...
Key Techniques To Learn On A First Aid Course
Introduction First aid training is an incredible qualification that can enable one to offer life saving assistance in an emergency....
Best Tips For Managing Your Building and Construction Projects
Building and construction projects consist of many tasks, from job-site duties to office paperwork. Juggling it all can oftentimes be...
How To Choose The Best Locksmith For The Job
The existence of a locksmith is very crucial for society because they help out countless people on a daily basis....
5 Modern Conservatory Ideas To Create A Serene Escape
Having a serene and relaxing conservatory is the dream, especially in the summer months. Creating an extension of your home...
Tech6 years ago
Creating An e-Commerce Website
Tech6 years ago
Design Template Guidelines For Mobile Apps
Business6 years ago
The Key Types Of Brochure Printing Services
Travel9 years ago
Who Else Wants Also Nfl Hat
General6 years ago
Kobe Bryant With His Unique Nba Jerseys
Tech7 years ago
Why Small Businesses Can't Ignore Mobile Technology
Tech6 years ago
Climb Google Using These Checklists
Health8 years ago
Health Supplements For Sports Activities Nutrition