Though debt settlement is fast emerging as the fastest way to get rid f large amounts of debt, there are still some consumers who hesitate to opt for it. This is because debt settlement can impact your credit scores and these will get reflected on your credit report. While an adverse credit rating is a small price to pay in order to lead a debt free life, a low credit score could hamper your chances of getting credit in the future. Therefore, it is important to realize the implications that debt settlement has on your credit ratings before choosing debt settlement as a way to eliminate your debt.
If you are a consumer who has always had a good credit history, a debt settlement can deal a pretty severe blow to your credit score. Debt settlement involves defaulting on payments (during the period of negotiations) and this could pull down your credit worth considerably. However, if you do not have any assets or savings that can be used to pay off your debts, debt settlement may still be a good option for you. While deciding to go in for debt settlement, the factors that you should consider are whether or not you would be using the credit card again in the near future (as a low credit score could impact your chances of receiving credit later) and whether it is possible to use some other method of debt elimination which would not impact your credit score.
As a consumer with an average credit, it will be far easier for you to restore your score to where it was when you entered the debt settlement program as compared to consumers with good credit. Especially if you are a person who has had to live with an average credit score despite making your monthly minimum repayments, then not only will debt settlement help you to get rid of the monthly dues but also, with a little proactive rebuilding after completing the settlement program, you will be in a better position to obtain a loan than when you contacted your debt settlement company.
In case you have a bad FICO score of less than 600 or so, the impact of the debt settlement program will be negligible in the long term. In fact since the debt settlement program will help you to clear up your dues and become debt free, a debt settlement can actually help you to build a good credit score.
If you are a consumer who has always had a good credit history, a debt settlement can deal a pretty severe blow to your credit score. Debt settlement involves defaulting on payments (during the period of negotiations) and this could pull down your credit worth considerably. However, if you do not have any assets or savings that can be used to pay off your debts, debt settlement may still be a good option for you. While deciding to go in for debt settlement, the factors that you should consider are whether or not you would be using the credit card again in the near future (as a low credit score could impact your chances of receiving credit later) and whether it is possible to use some other method of debt elimination which would not impact your credit score.
As a consumer with an average credit, it will be far easier for you to restore your score to where it was when you entered the debt settlement program as compared to consumers with good credit. Especially if you are a person who has had to live with an average credit score despite making your monthly minimum repayments, then not only will debt settlement help you to get rid of the monthly dues but also, with a little proactive rebuilding after completing the settlement program, you will be in a better position to obtain a loan than when you contacted your debt settlement company.
In case you have a bad FICO score of less than 600 or so, the impact of the debt settlement program will be negligible in the long term. In fact since the debt settlement program will help you to clear up your dues and become debt free, a debt settlement can actually help you to build a good credit score.
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