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Does Credit Card Debt Settlement Affect Your Credit Score?
Debt settlement involves paying a small percentage of the original credit card balance instead of the full amount. Numerous debt reduction companies are offering these services today.
Consumers should expect their credit ratings to be negatively affected as a result of debt settlement, since credit card companies will not report a current status until the debt is paid in full.
Hector Milla Editor of the “Get Rid Of Credit Card Debt” website — http://www.GetRidOfCreditCardDebts.net — pointed out;
“…While everyone’s credit will be negatively affected, the fallout will be different depending on current financial circumstances. For example, if the consumer is already late on all or most of their credit card payments, and especially if they are more than 90 days past due, then debt settlement won’t cause the credit score to dip much further. On the other hand, if all accounts are current, going the debt negotiations route will cause the credit report to take a major nose dive…”
Creditors are willing to settle with consumers who are behind on their payments because of the risk of bankruptcy. A creditor will not negotiate for a lesser balance when the account is current, since there is no reason to believe that the consumer is in financial trouble. On the other hand, if the account has been past due for at least a few months, red flags fly up, and the creditor begins to consider their options. In many cases, negotiations are successful in these cases, since receiving part of the money is better than none at all.
Debt negotiation firms collect monthly payments for a period of three to six billing cycles. Then, a settlement representative will attempt to negotiate a lower balance with each creditor in order to pay the account in full.
During this period of time, the consumer is not making any payments to any of their accounts, and therefore collection efforts will continue. In some rare cases, consumers may find themselves being sued by their creditors despite debt negotiation efforts. In most situations, however, debt collection efforts will consist of regular, and perhaps persistent, phone calls.
Since the creditors are not being paid anything at all, they will quickly make negative reports to all three of the major credit bureaus. Credit scores, which were once in the good to average category, will quickly tumble to an all-time low. These reports will not change until negotiations occur, and the agreed lower balance is satisfied.
“…Even when the account is paid, the credit bureau report will not reflect “paid as agreed” or “paid in full.” Rather, accounts will be listed as paid, but through a debt settlement agreement. Few creditors are willing to extend credit to customers who can’t, or won’t, pay their balances as agreed…” H. Milla added.
Further information about trusted and reputable companies for credit card debt settlement by visiting; http://www.GetRidOfCreditCardDebts.net