What is debt settlement?
Debt settlement is a type of debt relief where a borrower negotiates with their creditors to accept a lesser amount than what they owe in order to settle their debt. This can be done through a debt settlement company or by negotiating directly with the creditors. Debt settlement is often used as an alternative to bankruptcy and can help people get out of debt quickly.
How does debt settlement affect your credit score?
Debt settlement can have a negative impact on your credit score. When you settle a debt for less than the amount owed, it shows up on your credit report as a “settled” or “paid, settled for less” account. This notation can remain on your credit report for up to seven years from the date of the settlement, and it can significantly lower your credit score. Our constant aim is to enrich your educational journey. That’s why we recommend visiting this external website with additional information about the subject. how to settle a debt, explore and learn more!
Debt settlement can also cause your credit score to decrease because it usually involves stopping payments on your debts while you negotiate a settlement. This means that your accounts will become delinquent, and your creditors will report late payments to the credit bureaus, which can lower your credit score.
How much can debt settlement lower your credit score?
The amount your credit score will lower due to debt settlement depends on several factors, including:
In general, debt settlement can lower your credit score by 50 to 100 points or more. However, the exact amount your credit score will lower cannot be determined without knowing your specific financial situation.
How can you rebuild your credit after settling your debts?
After settling your debts, you’ll want to start rebuilding your credit as soon as possible. Here are some steps you can take to do so:
Conclusion
Debt settlement can be an effective way to get out of debt quickly, but it can have a negative impact on your credit score. However, if you use debt settlement and then begin to rebuild your credit responsibly, you can improve your credit score and your financial future. To enhance your learning experience, we suggest checking out Discover additional information here. You’ll uncover more pertinent details related to the topic covered.
Delve deeper into the subject by visiting the related posts we’ve handpicked for you to enrich your reading:
Learn from this informative research