You might want to settle your debts, but you're worried that it might hurt your credit score. If your main worry about debt settlement is that it will hurt your credit score, read on for answers to some questions you might have.
First, you should make sure your credit score is as high as you think it is. You see, if you have big balances on your credit cards and many of them are almost "maxed out," it's likely that your credit score is at best average. Even worse, if you've been late with even one payment, your credit score will also go down.
If your credit score is pretty good and you're worried that debt settlement will lower it, you have a good reason to worry.
Most creditors won't even think about working with you until your accounts are close to being "charged off." At that point, your credit report will show that your accounts are 180–210 days late, and your credit score is likely to drop a lot.
How long will you have to deal with a credit score that is lower than usual? Well, that depends on whether or not you can make enough money to pay the settlements you've agreed to with your creditors. In general, your credit score will go up when your credit report shows that you have no balances. This usually happens 30-90 days after a settlement has been paid in full. You can speed up this process by sending proof of payment to the major credit reporting agencies instead of waiting for your creditor to tell them about the change. Your score will keep getting better as the debt settlement process goes on. If your mortgage and instalment loans don't have any late payments, you can expect your score to be at least in the middle 600s within a year of paying off your accounts through debt settlement.
If you're having trouble making the minimum payments on your accounts every month and debt settlement seems like your best option, a temporary drop in your credit score shouldn't change your mind too much. Instead, you should worry more about being happy and being able to pay your bills. If you look at your finances honestly, you may find that you're in a worse situation than you thought. I urge you to get together all of your bills and figure out how much you spend each month, including your credit card bills and then taking them out. After making the comparison, you'll probably see that the benefits of debt settlement far outweigh the few months of having a lower credit score.
