Repair Credit With Debt Settlement

Will Negotating Help?

Can you repair credit with debt settlement? Sorry, but settling debt by negotiating with your creditor’s is not a method for credit repair.

Debt settlement is when you or someone on your behalf negotiates with a creditor that you owe money to in an effort have the creditor “settle” for a lower payment and/or interest rate.

The goal of the negotiation is to help you save money so you can more easily pay off your debts.

Here are the types of unsecured debts which may be put into a debt settlement program:

  • Bank Credit Card Debts
  • Store Card Credit Card Debt
  • Credit Union Credit Card Debt
  • Medical Bills.

This is where you have a settlement company or law firm negotiating with your creditors to lower your payoff amount by 40-60%.

So you really can’t repair credit with debt settlement.

Advantages to Debt Settlement:

  • The debt settlement company will negotiate with creditors to reduce interest and/ or your principal balance
  • Debt can be settled in a relatively short time frame.

  • You will save thousands of dollars.

  • Your monthly payments can drop dramatically.

  • You make one lump sum payment per month so you are not paying 5-10 different bills every month.

  • You will no longer be fighting your battle alone.

  • These are legitimate programs - A good debt settlement company can’t tell you when calls from creditor calls will stop, but you will be advised on how to handle them.
Disadvantages to Debt Settlement:
  • Your credit will be affected in a negative manner. A negative mark like this can remain on your credit report for a number of years unless you work with a reputable credit repair company. However, an account that indicate "settled as agreed" is not as harmful to your credit history as an account that indicates a charge off.

  • This may be a better option for you than bankruptcy. It is typically reported on your credit record with such wording as "Settled" or "Settled as Agreed" or "Paid as Agreed". However, all the late payments that you made prior to the settlement will remain on your credit report until the statute of limitations runs out unless you take steps to credit repair. At that point, credit repair might help to remove the negative marks if the reporting creditor fails to provide documented proof to the reporting agency.

  • Creditors will still be able to bother you while your accounts are being negotiated. There is also a chance you could be sued or have your wages garnished by any creditors. However, you can only have your wages garnished by one creditor at a time. Although some states will not allow garnishing at all.

  • The majority of debt settlement programs that I have researched will only accept you if you have $10,000 or more in unsecured Credit Card Debt

Is Debt Settlement Right For You?

There is one way that you can use your experience to repair credit with debt settlement. You will be able to pay bills on time, thus creating a better credit history. However, the late payment history stays with you which is why you want to use a legitimate credit repair company.

This is the best debt relief option when you know that you cannot afford debt consolidation and you do not want to file bankruptcy. If you are in collections, cannot afford your current payments, are either not a candidate or are unwilling to file a bankruptcy, you may be the ideal candidate for debt settlement.

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