Since you found this article, it's likely that you're thinking about debt settlement or have already started or finished a programme to do so. In either case, you'll be wondering what will happen to your credit score after you finish a debt settlement programme.
As you know, debt settlement lets people talk to their creditors and come to an agreement where they can pay off their credit cards for less than the full balance. Most of the time, people are able to settle for 50 percent or less of what they are really owed.
What will this do to your credit score? Well, debt settlement itself doesn't hurt your credit score, but being late on your payments does. You see, creditors won't settle your accounts for less than the full balance unless the account has reached a certain level of lateness. Most people who settle their debts do so because they have already tried to get their creditors to lower their interest rates or help them in some other way, only to be told that the interest rate and fees will stay the same and no relief can be given. This makes a lot of people look for other ways to get out of debt, like bankruptcy or debt settlement.
Once your accounts are late, your credit score will go down, and in some cases, it will go down a lot. The good news is that you can get your credit score back once the debt settlement process is over. Your credit score will go up automatically once your creditors report that your account now has no balance. In some situations, though, you may need to take charge and work on each of your credit reports on your own, one at a time.
You see, some creditors are a little "sloppy" when it comes to credit reporting, and they may not automatically update your accounts. On the other hand, mistakes just happen sometimes, and these mistakes need to be fixed.
To be sure that your credit report has been updated, you should make copies of all of your settlement paperwork and send them to each of the major credit reporting agencies with a request to make the necessary changes. This will make sure that your credit files are correct, and as a result, your credit score will go up. Once the changes have been made, you can expect your credit score to be in the middle 600s 9 to 12 months after you've paid off your accounts. If you've paid your mortgage(s) and/or car loan(s) on time, this range could be even higher.
Many debt settlement companies will give you the information and paperwork you need to start the process of getting your credit back on track. So, as you can see, there is light at the end of the tunnel, and you will be able to hold your head up high again with a good credit score. I hope it goes well with your plans to get out of debt and fix your credit.
