| How Settling Debts For Less Than The Full Amount Affects Your Credit |
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| Written by Don Wilson |
| Friday, 24 September 2010 21:00 |
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Debt settlement can save you tons of money. It can also lose you tons of money if you don't do it correctly. When you settle a debt for less than full it affects your credit negatively. Say you have a $500.00 bill in collections and they let you settle for $200.00. What your creditor wont tell you is that depending on your credit score a settlement can be a 50 point difference on your credit score.
Debt settlement can save you tons of money. It can also lose you tons of money if you don't do it correctly. When you settle a debt for less than full it affects your credit negatively. Say you have a $500.00 bill in collections and they let you settle for $200.00. What your creditor wont tell you is that depending on your credit score a settlement can be a 50 point difference on your credit score. How much your credit will be affected will be different for each person. If your score is very high then it will go down a lot more than someone with a lower credit score. There are different factors that cause your score to change but the higher it is the more it goes down. I'll show some numbers to make this clear. Settling that bill made your credit score go down 50 points. Typically, people will settle bills in bulk, instead of all at the same time. The change of 50 points can make your interest rates on loans go up one to three percent for future loans. More interest for credit cards. In the long run, the interest charges could be 10 - 20 times more expensive then what you saved by debt settlement. In short, you must consider the long term affects of a debt settlement on your situation. Sometimes debt settlement is great. Given you desire to purchase a home so you can own it instead of paying on it and your landlord keeps all of the money but the banker doesn't loan to you because you have bad debt on your credit report. Settle the debt because the pros definitely are larger than the cons. Settling your debt is an easy way to get out of debt instantly. There is a correct way of doing it. You will need to learn how to settle debts correctly before you start settling them so you can save the most money and get out of debt the fastest. The more leverage that you can build over your creditor the more money you will get out of your settlement. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. I'm Don Wilson and i'm an expert in debt settlement. To receive a Debt Settlement Letter Beat by www.beatdebttoday.com |