What is debt settlement credit score impact?
While a debt settlement program may help you get out of debt, debt settlement credit score impact can be serious and can jeopardize your financial future.
What is debt settlement? It’s a strategy for paying off debt where you work with a debt settlement company to ask creditors to wipe out your debt by offering a lump-sum payment on some portion of the total amount you owe. And though this strategy works for some individuals, debt settlement credit score impact is always negative, and usually significantly so. In fact, after you go through the debt settlement process, your credit score may be damaged for as many as seven years, preventing you from taking out loans, renting apartments, buying a car or getting a mortgage.
That’s why, before you apply for debt settlement, it’s important to think through all your options for getting out of debt.
Why is debt settlement credit score impact so negative?
How does debt settlement affect your credit? Debt settlement credit score impact is negative because to get companies to settle the debt, you first must stop paying your bills. After a period of months, when your creditors are worried they might not see any more payments from you, they are more likely to settle your debt for a portion of what you owe.
But in the meantime, because you stopped making payments on your financial obligations, debt settlement credit score impact is a major blow to your financial credibility, making it difficult to achieve your financial objectives.
How can I avoid an adverse debt settlement credit score impact?
There are many ways to get out of debt without incurring a negative debt settlement credit score impact. At American Consumer Credit Counseling (ACCC), we offer free credit counseling that can help you explore all your options for how to settle debt and achieve your financial goals.
When you meet with a certified credit counselor at ACCC, we’ll help you to take a clear-eyed look at your financial situation and present you with personalized options for getting out of debt as quickly as possible. We can answer questions about the pros and cons of bankruptcy vs settlement and introduce you to options like a debt management plan where you can pay off debt quickly without having to deal with a negative debt settlement credit score impact. For more information, contact us today to schedule your free credit counseling session.
