credit score
If you’re considering debt settlement, it’s important to understand how it will affect your credit. It’s a fact that debt settlement will lower your credit score, but how much it decreases will depend on your specific circumstances and the amount of debt you settle. Moreover, it will also vary from person to person because of the different factors that make up your credit score.
The most obvious way that debt settlement can hurt your Credit Repair Coral Gables is by adding a delinquent status to it, which will cause your scores to drop. The exact effect on your credit depends on how many accounts are in delinquency and the total amount of outstanding debt you have. However, even if you’re making timely payments on other debts, settling a single debt will still hurt your credit.
Another way that debt settlement can hurt your credit is when a creditors reports the account to the credit bureaus as “settled.” This will add a negative notation to your report and will impact your credit score negatively. It may be a better option to work with a creditor that will agree to note the debt on your report as being paid as agreed rather than settled, as this will have less of an impact on your scores.
Can a settled debt still impact my credit score?
Regardless of how a creditor chooses to mark the settled balance on your account, it will remain on your report for seven years after the date of your first missed payment. During this time, lenders can see the negative entry on your report and be unlikely to want to offer you new credit or loans.
It is possible to dispute the information on your credit reports, including settled accounts, but this can be a lengthy process. In addition, unless you can prove the information is inaccurate, the creditor or collection agency will have the right to keep the settled account on your report.
When comparing the effects of settling your debt against not paying your debt at all, it’s important to remember that the impact on your credit is likely already severe due to late payments or high credit card balances. Once you are able to stabilize your budget and pay on-time and in full, your credit will improve. It will take some time to get there, but in the long run, you’ll find that it’s worth the effort if it allows you to save money and prevent future problems with finances.