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How does debt settlement
impact my credit? |
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Call Today: (877) 274-1260 |
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If you
successfully complete our program, it’s possible
that you’ll enjoy these benefits: |
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Settle your debts for less than you owe |
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(read here for full details about how much you can expect to save) |
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Resolve your unsecured debts in 18 to 60 months |
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(read here for full details on how
long our program lasts) |
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No Up Front Fees - Don't Pay Till You See Results! |
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| The Effect of Debt Settlement
on your Credit |
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A relatively new approach to debt resolution, debt settlement or
debt negotiation is the process aimed at negotiating with creditors
to lower the amount that you owe. A settlement offer is only
attractive to a creditor when a consumer is behind on their
payments. The reason why this is the case is that a past due debtor
is far more likely to either 1) file bankruptcy; 2) never pay the
creditor at all; or 3) cost so much money in any collection efforts
that a settlement offer is more profitable for the creditor. The
financial incentive of debt settlement is clear for the consumer:
you are potentially able to cut your balance in half. The main
downside is that since you have to be past due in order for a
settlement to be reached your credit will most likely suffer.
• Debt Settlement and Consumers with Good Credit: The impact should
be pretty significant. If you have high balances, however, then
even your positive credit history is being weighed down by the
negative effect that the amount you owe is having on your credit.
This being the case other factors that you should consider are 1)
when you anticipate using your credit again and 2) what other
options are available to you. If you’re retired and not planning on
getting another mortgage, then debt settlement is still probably
your best option. If you’re 30 years old and planning on buying a
home in the next year or two, I’d probably reconsider. And by
reconsider, I mean I’d reconsider debt settlement and getting a
house. If you’re buried in minimum payments, then the last thing
that you should be thinking about is adding on more debt. If you
have no real assets (equity in your home, for example), then debt
settlement may be a suitable solution because you don’t have any
options at your disposal that don’t affect your credit negatively.
On the other hand, if you have a lot of equity in your home, then it
may be your best option to tap into it because the credit impact of
debt settlement may cost you more in the long run if you try to
refinance or buy another home.
• Debt Settlement and Consumers with Average Credit: As a result of
debt settlement you will still take a sizable hit in the short-term,
but it will be far easier for consumers with average credit to
restore their score to where it was when they entered the program
versus consumers with good credit. Keep in mind, if you’re the sort
of consumer that has always made payments on time, but you’re still
stuck with a mediocre credit score, then it’s probable that in the
long-run debt settlement will help you by eliminating the debt that
dragging down the amount owed component of your credit score. With
some proactive rebuilding after completing your debt settlement
program, you should be in a better position to obtain a loan than
when you contacted your debt negotiation company.
• Debt Settlement and Consumers with Bad Credit: For those of us
with bad credit (600 FICO score and below), the impact of debt
settlement may still be negative in the short-term, but the credit
impact will be so negligible that the savings from enrolling high
interest credit cards will most likely overcome it. Moreover, if
your accounts are already in collections and charged-off, then debt
settlement will likely improve your credit score since you’d be
paying off seriously past due accounts. If you fit in this boat,
then debt settlement is an ideal fit because you save a lot of money
while sacrificing much less from a credit standpoint. |
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