Effect Of Debt Settlement on Your Credit Score
Debt settlement is a kind of debt relief scheme that can help you deal with it in a short span of time. But what happens to your credit score when you go for settlement? Let’s find that out in this article.
What Is Debt Settlement?
Debt settlement is when you offer to repay only a portion of the amount that you owe instead of the entire sum. It is paid typically in a lump sum one-time payment when the lender agrees to write off the remaining balance.
But what happens to your credit score? The credit card score goes considerably down when you go for a debt settlement. This is because you only pay a portion of the amount instead of paying off the entire money that you borrowed.
So, is it better if you keep the Debts Unpaid than Settling for an amount?
You may think that keeping your debts unpaid is a better option, especially when both of them affect your credit score. But the ‘unpaid’ notion on the credit report stays for years to come that gives the wrong impact.
Your credit report is an indication of your credit history. Based on this report the creditors in the future will decide whether to lend you a loan or not. So, a mention of unpaid debts will raise a red flag in the future.
Whereas when you go for settlement, the credit report mentions ‘settled’ and not ‘unpaid’. So, now, you can understand which one looks better on your report.
Therefore, you can definitely opt for debt settlement but the best option is to go for a consumer proposal Toronto option. With this option, your representative will talk for a settlement amount that both parties agree with. Then you get the option of paying off this proposal amount in installments for a specific period. And the mention of the same stays only for four to six years on your credit report. This means it is a win-win option.
However, the best way is to consult a professional debt solutions company related to all your debt-related problems. Are you looking for one? Contact us and get a free consultation right away.
