How to Start Rebuilding Your Credit After Debt Settlement

When you are behind on credit card payments and other debts, you may not see a way out of the financial circumstances you have found yourself in. While there are various options you may be able to consider for getting out of debt and getting a fresh start, you may want to consider debt settlement first. Debt settlement involves negotiating with your creditor to pay only a percentage of the debt you owe. The creditor then agrees, in exchange for paying that percentage of debt, to forgive the remaining debt. As such, you can get out of debt with debt settlement by paying much less than what you actually owe.

Settling debt does have an impact on your credit as Experian explains. However, the credit reporting bureaus — Experian, Equifax, and Transunion — clarify that debt settlement has less of an impact on your credit than bankruptcy. And moreover, settling a debt is much better for your overall credit than failing to pay the debt at all. Given that your credit will see some consequences from debt settlement, how can you begin rebuilding?

Obtain Your Credit Report

After you settle your debt, you should obtain a copy of your credit report so that you have a clear understanding of what is included and where your credit score stands after your debt settlement. It is a good idea to keep track of your credit score as time moves forward, and to keep track of debts associated with all open accounts.

Make a Budget

To rebuild your credit, you will need a realistic budget. You should ensure that your budget does not include more money than you have coming in each month — you do not want to end up in a situation again where you cannot repay your debt. Your budget should focus on leaving according to your means and avoiding any new debt accruals.

In your budget, you should also account for the tax you will need to pay associated with your debt settlement. Any debt forgiven will be taxed as income on your income tax returns.

Get Approved for a New Credit Card and Pay Off the Balance Each Cycle

Slowly begin applying for new credit. This may involve obtaining a secured credit card at first, then obtaining a more standard unsecured credit card. To really rebuild your credit profile and raise your credit score, you should make charges each cycle but only charge what you can pay off. This will show that you are responsible with your credit, and your score will increase. As your credit score improves, you will be eligible for more credit with lenders.

Contact a Lilburn Debt Settlement Attorney for Assistance Today 

If you are struggling with consumer debt and are not likely to be in a situation to pay it all off in the foreseeable future, you should consider debt settlement. An experienced Lilburn debt settlement lawyer at Konn Law Firm LLC for help with your debt settlement negotiation. We are here to begin discussing your debt settlement options with you, and we can also answer any questions you have about the process of debt settlement or life after your debt settlement has gone through. Contact our firm to learn more about how we assist debtors with various forms of consumer debt and debt settlement negotiations in Georgia.

Source:

experian.com/blogs/ask-experian/will-settling-a-debt-affect-my-score/