Debt Settlement and Your Credit Report - Is it Worth the Hit?
The impact of debt settlement to your credit report should be carefully considered before hiring a debt settlement firm to negotiate reductions in your debt on your behalf.
While not as bad as a bankruptcy, it is still pretty bad.
However, with proper planning, you can overcome the negative credit effects in 2 years or even less.
Understanding the impact of debt settlement on your credit report will enable you to decide whether the hit your credit takes will be worth it when compared to the amount of debt relief you can obtain.
The process is actually pretty simple.
First, determine how much debt relief you can expect to obtain by going by hiring a debt settlement negotiation company to procure debt reduction for you from your creditors.
As a rule of thumb, take the total amount of unsecured debt you have, and multiply it by.
6, or 60%.
This works out to $6000 in debt reduction for every $10,000 in debt you have, so if you have $20,000 in unsecured debts, you will have that reduced by $12,000.
This amount usually includes whatever fees the debt settlement company charges you.
Next, determine your monthly savings.
If you are paying $1000 a month, you will be able to reduce that to $400, saving you $600 a month.
Often, this amount will allow people to keep a house or mortgage that they otherwise might not be able to afford.
When you factor in the possibility of lowering your car payment or house payment by negotiating with those lenders separately, the amount of debt relief possible becomes very substantial indeed.
Now that you have a good general idea of how much you can save, and how that savings will benefit you, consider the cost of having debt settlement on your credit report.
The main consequences are as follows: You won't be able to buy a new house for 2 years.
You can still finance a car, but you'll pay a much higher interest rate.
You won't be able to get any new credit cards.
Now these affects are bad, but they are by no means the end of the world.
But even these affects are to a large extent often irrelevant.
Since most people considering debt settlement already have some late payments, they are more than likely already faced with these consequences in any case.
This being so, the negative impact of debt settlement on your credit report is almost a moot point, as your credit is, or soon will be, already negatively affected anyways.
So for most people, the benefits of debt settlement vastly outweigh the cost in terms of the impact it will have on your credit score.
If this is your situation, then you should probably strongly consider acting in your own best interest and settling your debt.
It often means being able to keep your home and your car, which, in this day and age of rampant foreclosure and repossession, is far more important than a mere number on a credit report.
While not as bad as a bankruptcy, it is still pretty bad.
However, with proper planning, you can overcome the negative credit effects in 2 years or even less.
Understanding the impact of debt settlement on your credit report will enable you to decide whether the hit your credit takes will be worth it when compared to the amount of debt relief you can obtain.
The process is actually pretty simple.
First, determine how much debt relief you can expect to obtain by going by hiring a debt settlement negotiation company to procure debt reduction for you from your creditors.
As a rule of thumb, take the total amount of unsecured debt you have, and multiply it by.
6, or 60%.
This works out to $6000 in debt reduction for every $10,000 in debt you have, so if you have $20,000 in unsecured debts, you will have that reduced by $12,000.
This amount usually includes whatever fees the debt settlement company charges you.
Next, determine your monthly savings.
If you are paying $1000 a month, you will be able to reduce that to $400, saving you $600 a month.
Often, this amount will allow people to keep a house or mortgage that they otherwise might not be able to afford.
When you factor in the possibility of lowering your car payment or house payment by negotiating with those lenders separately, the amount of debt relief possible becomes very substantial indeed.
Now that you have a good general idea of how much you can save, and how that savings will benefit you, consider the cost of having debt settlement on your credit report.
The main consequences are as follows: You won't be able to buy a new house for 2 years.
You can still finance a car, but you'll pay a much higher interest rate.
You won't be able to get any new credit cards.
Now these affects are bad, but they are by no means the end of the world.
But even these affects are to a large extent often irrelevant.
Since most people considering debt settlement already have some late payments, they are more than likely already faced with these consequences in any case.
This being so, the negative impact of debt settlement on your credit report is almost a moot point, as your credit is, or soon will be, already negatively affected anyways.
So for most people, the benefits of debt settlement vastly outweigh the cost in terms of the impact it will have on your credit score.
If this is your situation, then you should probably strongly consider acting in your own best interest and settling your debt.
It often means being able to keep your home and your car, which, in this day and age of rampant foreclosure and repossession, is far more important than a mere number on a credit report.
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