3 Impacts of Debt Settlement on Your Financial Life

Debt Settlement

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. Click here https://trendfar.com/ for detailed articles regarding loans, financing, and business.

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. If you want to learn more about Debt, credit, and finance, kindly visit this dedicated website https://worldnewsnest.com/ for useful information.

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. If you want to know more about business management and financial abilities, check out this website https://www.bullhornnews.com/.