How Does Debt Settlement Affect My Credit and For How Long?

One of the best things about how the current credit world works is that nothing lasts forever. This should be especially comforting for people with debt problems. If you have struggled a lot in the past, then you should understand that you are not resigned to a terrible financial future. Credit reports roll over and that provides a lot of comfort for any and all consumers out there. This is important when considering options like debt settlement, which obviously have a slight negative impact on credit. You won't have to face those problems for more than a few years and if you get to the business of improving your credit, things will really open up for you.

What effect does does settlement have on credit?

Understand first off that debt settlement is going to have an impact on how creditors view your credit score. If you have been around the block a little bit, you already know this. Every single move you make is noted and it is calculated. You just can't run from your credit score, which is disconcerting for some. Settlement initially puts a slight smudge on your credit report and brings your score down a little bit. The thing to recognize is that this settlement plan will help you in other areas where your credit is concerned.

When you make a settlement offer, you are flushing a large debt right down the drain. What this means is that a key component of your credit formula is improved drastically. How much credit you have out is a major factor that impacts credit. This is especially true when credit cards are maxed out like most people experience when they consider settlement. Without that debt on the ledger, things should open up for you and your credit report won't look nearly as bad as you think.

How long will it impact my credit score?

Most things stay on your credit report for a period of five to seven years. With that said, the further away you get from the event, the less impact it will have. Settlement is nice because it allows you to move forward right away. You don't have to wait around and you don't have to struggle with debt for a long period of time. You are moving towards a solution on the day that you settle, which puts distance between you and the things that are hurting your score.

Source by Hector Milla

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