Credit Report News, Tips & Advice
Website CertifiedPrivacy Protected
Credit Report News, Tips & Advice « Credit Reports > Credit Report Advice > Manage debt settlement well for a good credit report

Manage debt settlement well for a good credit report

By Andy Snyder
Published: Thursday, March 11th, 2010

The credit report is a very important document which reflects one’s ability to handle various credit instruments and hence makes a creditor want to give him or her loan. It is something like a background check and hence must be kept untarnished.

There are several ways that one’s credit report can be spoilt. Debt settlement is one such issue which will definitely have a huge impact on the credit score.

Debt settlement is something that is done when a person does not have enough money to pay off the dues.  First, the credit report will decide whether or not a person must file for bankruptcy. If the person files for bankruptcy, the creditor will not get anything from the person who has taken the loan. Usually, the person is encouraged to go in for debt settlement. But it must be kept in mind that a person who keeps track of the credit report and pays off his dues in time will not have any such problems.

There are companies known as debt settlement companies which can be hired by people to go about doing the settlement. So when you first go out and ask for a settlement, a debt settlement company will take charge of your finances. They will first advise you to ignore all official correspondence from you creditor. The first installment that you pay them will go as their fees. Then they will start accumulating all the money that you send them after that. After it has reached a substantial amount they will go about approaching the creditor to negotiate a settlement.

But it is only fair that the creditors get their money back. So they are not going to lay off unless and until the dues are paid. Usually the settlement is done with an intention to get an ‘all dues paid’ entry on the credit report. Else it will state that the due is unpaid for and is outstanding or it will say that you have defaulted on payment. This can be very bad for your future endeavors. Hence always try and go for a settlement if it ever comes to that.

The creditors usually charge late fees and add an inflated interest rate to the money owed. This can be renegotiated and then the two parties can come to a consensus.

The things that can be written on the credit report are ‘charged off settled’, ‘paid settled’ or ‘not paid in full’. All of these are very bad for the credit score. Hence always renegotiate the terms with the bank with the help of a debt settlement agency. Try to ask for the same interest rate to apply for the extended period. Ask for removal of any late fees. And also ask that the entry in the credit report be ‘paid in full’ once you make the full payment. This way credit report will not be tarnished. It’s always better to negotiate with the bank rather than just abscond as this will show badly on your report.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.