Does Debt Settlement affects my credit score?
Debt settlement is highly significant on high- interest rates debt such as credit card. Debt settlement is a trusted financial strategy, merging multiple bills (usually credit cards) into a single debt paid off through a debt management plan or with a loan. Settlement is a sensible solution for consumers struggling with credit card debt. It can be done with or without a loan. It will cut costs by reducing the interest rate and lowering monthly payments, helping you eliminate debt and may even improve credit score.
A Debt Management plan untangles the mess consumers face every month trying to keep up with multiple bills and multiple deadlines from various card companies. In its place is a simple remedy: one payment to one source, once a month.
And you’re saving money at the same time!
There are two significant forms of debt settlement – qualifying for a bank loan or signing up for a debt management program that doesn’t involve a loan. It pays to look at the pros and cons of both options before choosing.
When can’t you manage your debt?
Debt settlement has the potential to hurt your credit score in several ways, depending on which method you use. For people using a debt management plan for settlement, it is essential to understand your agreement with your credit counsellor fully. It is also necessary to know whether you are working with a credit counsellor. From a not-for-profit organization or working with a for-profit debt settlement/settlement firm.
Credit Counselors and Debt Management Plans
A Debt settlement company advises people on how to manage their money and establish budgets. Sometimes, credit counselors work with you to develop a debt management plan and help you make your payments.
It is essential to make sure that your credit counseling organization makes all payments for you on time. Credit counseling organizations typically make agreed-upon debt payments. For you each month, and so the responsibility is on them to make sure they pay each bill on time.
Payment history is the most crucial factor in calculating your credit score—accounting for 35% of your FICO Score —and it is essential to avoid any late payments being recorded on your credit file.
It is essential to know what range your credit score falls into a debt settlement loan. People with a “poor” credit score usually face challenges to get approved for a debt settlement. People with “fair” to “exceptional” credit scores. It will have an easier time getting approved for a new loan, and will also be eligible for a lower interest rate.