Most people are unaware of what a debt settlement can do to their credit report. It has a huge effect on one’s credit, yet a consumer can easily get rid of their debts quickly. Debt settlement may have its own advantages and disadvantages but its best to weigh all of the important data and determine which one you’ll be benefiting more.
The Impact Of Debt Settlement On Credit Report Most people are unaware of what a debt settlement can do to their credit report. It has a huge effect on one’s credit, yet a consumer can easily get rid of their debts quickly. The credit report is to decide whether the borrower is entitled to file a bankruptcy, and usually, a bankruptcy is only approved if the consumer really cannot pay for the remaining balance. In most cases, consumers are often asked to file for a debt settlement rather than a bankruptcy. However, you can avoid reaching to this point by paying all of your bills on time and if you keep track of your credit report regularly by going through it on monthly basis and getting the credit score. If you still have done some irreversible financial mistakes or taken such decisions you should be aware what you have landed yourself into. Debt settlements affect your credit report in many ways. First of all, it can get a consumer to pay off their debts in no time because if they don’t they will be either filing for a bankruptcy or debt settlement, and either of two is not healthy for your credit. Debt settlement companies are often hired by consumers to help them out in managing their debts. As soon as the debt settlement process has started, the consumer is asked to ignore any letter issued by their creditors. These companies aim to lower the consumer’s monthly payments. The first payment will serve as payment for the fees then after that, the payments will now be accumulated and the company will now start eh process of negotiating with the creditors. Debt settlement companies often work on behalf of their consumers, but they, the creditors and the lenders often want to get their hands off of the issues as soon as their dues are finished off. Creditors also have a tendency to increase interest rates and charge additional fees such as late fees. All of these will be recorded in your credit report. Some creditors however, do exempt a consumer but the consumers usually pay $ 600 or more. The creditors will then regard it as income and they will still be require to the taxes that go along with the amount that they gave. Everything that goes on with the debt settlement process will be recorded on your credit report. This will include all of the recording payments that were made by the borrowed and it is often labeled as “charged off settled”/”Paid Settled” or” Paid in full”. Delinquent accounts will also be recorded on your credit report and it will stay there for seven years. Debt settlement may leave a lot of records in your credit report but it actually helps in relieving the consumer’s credit account from debts. Debt settlement may have its own advantages and disadvantages but its best to weigh all of the important data and determine which one you’ll be benefiting more. Choose the option that you think is the best for you and do whatever it takes to keep your credit in good shape and free of negative items. Joy is an active blogger who shares extremely interesting finance management tips over the web that encourages people to manage their personal finances, check credit reports and improve credit score regularly.
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