Your credit score is just one of a variety of factors considered by a lender or creditor when you apply for credit. Creditors want to make sure you are “creditworthy,” and not a huge risk, meaning that you are likely to pay back your debt in accordance with your creditor agreement. When your credit score decreases, lenders and creditors may be less willing to accept your application, and if they do, you may be stuck with a high interest rate. If you currently have debt that you are having trouble managing, or you are past due on certain accounts, you may be wondering how bankruptcy or debt settlement may affect your credit score.
It is generally known that filing for bankruptcy may decrease your credit score for a certain period of time. When it comes to debt settlement, however, many questions remain. Will debt settlement help me improve my credit, or will it harm my credit even further? Common questions like this are difficult to answer at a general level. Each individual and business will have a unique financial situation, and debt settlement may improve one individual’s credit score, while it may decrease another’s.
When Debt Settlement May Improve Your Credit Score
If you have past due accounts that are currently listed on your credit report, anything you can do to immediately pay off the debt will likely improve your credit score, albeit the amount it goes up may not be significant. When creditors see that you can pay off a past due debt, they gain a little bit more confidence that you currently are, or are on your way to being creditworthy. Creditors are willing to settle debts with consumers and businesses, and would rather not seek recovery of debt as part of a bankruptcy proceeding. Creditors are more likely to receive a greater amount of debt owed from settlement than they are from bankruptcy.
When Debt Settlement May Lower Your Credit Score
Most creditors are not likely to agree to settle debt that is current on payments. If you are making full payments each month, seeking debt settlement may actually lower your credit score. The reason for this is that your creditor would be getting less by settling the debt than it would if you continued to make your timely payments. However, there are situations in life that may make it difficult to keep up with your payments. When you are concerned that you may not be able to continue making timely and complete payments, debt settlement may be an option to consider in addition to other debt-elimination tools.
Your credit score is important, but it is always best to take charge of your debt and not worry so much about how your credit score will be affected in the present. By taking the steps to manage and/or eliminate your debt now, you will eventually be able to improve your credit score in the future. By speaking with a skilled legal professional, you will have a better understanding of how your credit score may be affected by debt settlement as well as bankruptcy and other debt-elimination methods.
Contact the National Debt Settlement Attorneys of Ariano & Associates, PLLC Today
Facing debt can be a daunting task when it begins to consume your life. Despite your best efforts, you may find that you are not eliminating your debt from month to month, but rather are only adding to it, even if you are keeping up with your payments. To determine what method of debt-elimination is best for your financial situation, you should consider speaking with a qualified Debt Settlement Attorney. Bankruptcy has been proven to help many consumers and businesses eliminate their debt, but this option does not fit everyone’s needs and interests. The Debt Settlement Attorneys of Ariano & Associates, PLLC provide every client with an array of options to consider in order to eliminate debt. There is no harm in at least speaking with someone who can help you get your head above water. Ariano & Associates, PLLC has received a numerous positive online reviews, demonstrating a focus on ensuring each client is satisfied with the legal representation and customer service they have received. To schedule your free consultation, contact Ariano & Associates, PLLC today by calling (888) 919-5569.