In 2018, 28% of Americans with credit had at least one account turned over to a debt collection agency. Facing overwhelming debt is extremely difficult, and many Americans turn to debt settlement to manage the load. Unfortunately, the reality is that settling debt for less than you owe does impact your credit score. Your credit score measures how likely you are to pay back debt on time, and debt settlement is a strike against you. How long does it take to get a good credit score after the settlement is complete? Here are the financial facts you need.
Negative Data Impacts Your Credit Report For 7 Years
In general, negative credit activity will impact your credit score for up to seven years. This includes late payments and defaults. The timeframe starts when the delinquency is first reported, not when the charge-off or default actually occurs.
The good news is that defaults and debt settlement don’t last as long on your credit report as bankruptcy does. Bankruptcy can lower your credit score significantly for 10 years.
There’s nothing you can do to remove valid negative information from your credit report. You simply have to wait out the reporting period.
Debt Settlement Doesn’t Erase Defaults
When you go into debt settlement, you’re taking care of money you owe. However, the fact that you fell behind and the account went into default will still impact your credit rating.
Some consumers think that settling a debt will remove the default from their credit report right away, which is not the case. It means that the debt is taken care of and collectors will not continue to pursue you for it.
Debt settlement is extremely helpful, though, because you don’t pay the full amount you owe. This financial assistance can give you a better fresh start.
How to Re-Establish Good Credit
Waiting for negative events like defaults to fall off your credit report is an important step in getting a better score, but there’s more you can do while you’re waiting.
The first step is to develop excellent financial habits that will help you stay out of credit trouble in the future. For instance, you might decide to buy things only with cash, or use a waiting period before you make any purchase of $100 or more.
Get a secured credit card and start making on-time payments to rebuild your payment history. Pay off your balance in full each month. To make this easier, use the card only for a specific type of purchase, like filling up the car with gasoline.
As you move forward with these good habits and rebuild your payment history, you can improve your credit score over time.
With These Financial Facts, Settle Your Debt Today
With these financial facts, you can now move forward with debt settlement. You deserve the relief of knowing that you are out from under the burden of overdue debt. The amount of stress it’s causing you isn’t worth it.
We can work with you to set aside funds that our skilled negotiators can then use to settle your debts. When you complete the program we celebrate with you that you Dropped the Debt!
Get started with our debt relief program today!