Yes, debt settlement can negatively impact your credit score:
How long it can affect your credit score ?
Debt settlement can negatively affect your credit score for up to seven years.
How it affects your credit report ?
When you settle a debt, your loan account is marked as “settled” instead of “closed” on your credit report. This indicates that you were unable to pay off the loan in full, which can make you seem like a risky borrower in the future.
Other factors that affect the impact :
The exact impact on your credit score depends on several factors, including:
The condition of your credit at the time of settlement
The reporting practices of your creditors
The size of the debts being settled
Whether your other debts are in good standing
Other debt relief programs, like debt consolidation and management, may have a less negative impact on your credit score.
Depending on your situation, working with a professional debt settlement company might save you money. But there are risks to weigh before you proceed down this path. Consider debt settlement costs and make sure they fit your budget. Remember that you’ll have to pay a significant amount in fees for any savings you get.
Look for companies that are licensed and accredited by relevant regulatory authorities. Additionally, consider factors such as the company’s years of experience, success rate in negotiating settlements, and transparency in fee structures.
Debt settlement companies and credit counseling services are different, but both can help with debt management:
Debt settlement companies
Negotiate a reduced amount of debt owed to a creditor. This can help avoid bankruptcy, but it can negatively impact your credit score. Debt settlement companies typically charge a fee, usually between 15% and 25% of the total debt.
Credit counseling services
Provide financial advice and guidance to help manage debt and credit. This can include budgeting advice, financial counseling, and referrals to other services. Credit counseling can help you avoid similar problems in the future.
Credit counseling is usually recommended before considering debt settlement. Credit counselors can help you determine the best course of action, which may include debt settlement if it benefits you the most.
Get in touch with us today at www.Settleloan.in and embark on your path to financial freedom
