How Bad Is Debt Settlement On Your Credit Report? How Many Points?

In terms of points deducted from your credit score, a debt settlement isn’t all that bad. However, you must remember that your credit score is not just about your credit score. Future lenders and creditors will be looking at your credit score, and most especially at that debt settlement, wondering if you will leave them high and dry with a chunk of owed change too.

Debt Settlement And Your Credit Score

Although there are no hard and fast rules when it comes to exactly how many points you will lose because of a debt settlement, most people report something around a 20 to 50 point loss. Depending on how ugly your payment history is (the single largest factor in your credit score), those 20 to 50 points could break your score – and chances are, if you’re considering debt settlement, you don’t likely have a very good payment history.

Fortunately that debt settlement will disappear from your report in 7 years. Unfortunately, during those 7 years lenders and creditors will see an unpaid balance and wonder if you will consider their loan worth paying in full. Obviously if you want to get any kind of a loan in the near future you should look to make the best of your situation.

Debt Settlement Quick Recovery

If you should happen to find yourself in a better financial situation and wish to get a new loan or line of credit, you should consider paying the debts you settled in full instead of letting them sit on your credit report. However, there are a number of other factors to consider, like how long the settlement has already been on your report.

Remember that all entries on your credit report remain for at least 7 years since the last action. So if your debt settlement has already been on your report for say 5 or 6 years, it may be worth it to just let it disappear. However, if you still have a few years left, or can’t wait to get that loan, then paying the balance of that debt will look better to a future lender or creditor.

Related posts:

1. How Will Debt Settlement Affect My Credit Report?
2. Do You Have To Pay A Bill Once It Comes Off Of Your Credit Report?
3. How Many Years Will It Take To Clear In Your Record If You Apply For Debt Settlement?
4. What Is The Difference Between Debt Consolidation And Debt Settlement?
5. How Does Debt Settlement Work?