Will Debt Settlement Affect Your Credit Score?

Posted: 21 Jan 2008 | Categories: Bankruptcy

The holiday bills are piling up and you’re not quite sure where you’ll get the money to pay them. Maybe this has caused you a few sleepless nights, along with an overall feeling of unrest. It’s not unusual to experience these problems due to overwhelming debt, interest and late fees owed to your creditors. If this is indeed where you find yourself it’s time to seek the proper solution to break free from the unsettling feelings you’re experiencing due to your lack of financial health and well-being.

If you’ve combed through various websites on the Internet and left no stone unturned in searching other sources of information to become free from debt, you may have uncovered some information about debt settlement as a potential answer to your current financial woes. While this type of debt relief is soaring in popularity, it also has many critics, and the information that you may have found available regarding debt settlement can be outright distorted, and oftentimes inaccurate.

One of the main areas of concern that people seriously ponder when weighing their options to become free from debt is the affect that debt settlement may have on their credit score. Yes, debt settlement may potentially have a negative impact on your credit score; typically, however, this would more likely be the case if your credit cards are current and have had no previous history of delinquency. On the other hand, if your accounts are classified as delinquent, it’s more likely that your credit score will realize a significant increase after your accounts are reflecting zero balances.

Now, let’s assume your accounts are all current, but you’re still faced with some tough choices; this may leave you contemplating debt settlement due to the fact that making ends meet at the end of each month is a battle which you’re no longer winning. Or, worse yet, you find yourself writing checks or taking cash advances from one credit card just to pay the minimum monthly payment on another. If either of these assumptions is true, you may want to reconsider just how much time, attention and significance you should really being contributing to your credit score.

Having a respectable credit score might bring a sense of calm to many people, but if you’re buried in debt that serenity is easily erased by continuous restless nights just trying to make sense of your finances in an attempt to stay afloat each month. While it is a “pre-requisite” of creditors to reach settlement agreements with consumers on only those accounts which are delinquent, please keep in mind that this delinquency is for a limited time, and the majority of the time so is the downgraded credit score with which you might end up.

In summary, if you believe that you’re able to tolerate exchanging what may be considered a decent credit score for financial relief and a temporarily inferior credit score, debt settlement may be an option you want to consider. If you’d like to learn more about the process of debt settlement, click here

Marie Megge is a consultant in the credit services industry. Over the past several years she has assisted many individuals in resolving their debt-related matters. For more information regarding credit and debt visit http://www.donaldsonwilliams.com

Article Author :Marie_Megge