How Debt Settlement Affects Your Credit
- A debt settlement company could make things worse. Though there are some legitimate debt settlement companies, many employ questionable methods that could end up harming your credit score.
- Your credit score takes a major hit. ...
- It stays on your credit reports for a long time. ...
- Your credit utilization could go up. ...
Full Answer
Can debt settlement hurt your credit?
While it can save cash and reduce your stress level, debt settlement can be costly to your credit score and make it difficult for you to obtain new credit for years. If you’re burdened with unsustainable debt, settlement is one potential solution that deserves consideration, but others may be less harmful to your credit rating.
How bad is debt settlement for your credit?
The risks
- Your creditors may not agree to negotiate. Not only is there no guarantee that the debt settlement company will be able to successfully reach a settlement for all your ...
- You could end up with more debt. If you stop making payments on a debt, you can end up paying late fees or interest. ...
- You may be charged fees, even if your whole debt isn’t settled. ...
Will settling a debt affect my credit score?
Settlement of your credit card debt will impact your credit score—but with persistence, determination, and a little bit of luck, you’ll be able to raise your score to new heights. Settling debt for less than the total amount owed is better for your credit than ignoring your debt, but it’s worth taking a closer look at bankruptcy if you can’t afford to settle your debt.
How to improve your credit score after debt settlement?
Use these tips based on the five components of the FICO score:
- Timely payments: Make all your payments on time.
- Credit Utilization: When you get a credit card, pay it off each month in order to maintain good credit utilization.
- Length of credit history: Keep your cards active.
- New Credit and Credit Mix: Take out a secured credit card. If your wife has a credit card, then become an authorized user. ...
