How Will Debt Settlement Affect My Credit Score?
Are you considering debt settlement but concerned about how it will affect your credit score? For most debtors in the Lilburn area who are thinking about debt settlement as a possibility, the impact of a debt settlement agreement on your credit score will be significantly less than the impact of failing to repay the debt you owe and remaining in delinquency. In other words, debt settlement will have an effect on your credit score, but it may not be as significant as you are concerned it will be. Our Georgia debt settlement lawyers can tell you more.
What is a Credit Score and Why Does It Matter?
What is your credit score, and why does it matter? According to Experian, one of the three credit bureaus that report credit information to potential creditors, “your credit score is a three-digit number that provides a snapshot of your overall credit health.” As Experian clarifies, your credit score can affect the rates you receive on loan offers and insurance policies, and your eligibility for certain forms of credit.
Credit scores range from 300 to 850. Scores between 300 and 579 are considered “poor,” those between 580 and 669 are considered “fair,” and scores of 670 to 739 are considered “good.” A person has a “very good” credit score if the number is between 740 and 799, and an “exceptional credit score if their number is between 800 and 850.
How Debt Settlement Impacts a Consumer’s Credit Score
How does debt settlement affect your credit score? Accounts on your credit score are classified as open, paid, or settled, and part of the calculation of your credit score involves the total amount of debt you owe across your “open” accounts. On one hand, you will owe less money and the percentage of your overall balance will be reduced, which can raise your credit score.
On the other hand, when a creditor forgives a remaining balance in exchange for the debtor paying a portion of the debt owed, the creditor will report that the debt has been “settled.” A settled debt will lower your credit score and will remain on your credit report for up to 7 years. How much will your score drop? It will depend in part on other aspects of your credit profile. In general, a score can drop from about 75 points to more than 150 points. A debt settlement lawyer can help you to understand what to expect based on your current accounts, the debt you owe, and the debt you want to settle.
Contact a Lilburn Debt Settlement Lawyer for Assistance with Creditor Negotiations and Your Debt Settlement Agreement in Georgia
When you are struggling with debt and considering your options, your credit score is likely to take a big hit if your debts remain delinquent or if you file for bankruptcy. While debt settlement will have some impact on your credit score, as we discussed above, it is often an impact that is less significant than other options, and you can begin rebuilding your financial profile once you pay the agreed-upon amount and your remaining debt is forgiven. To find out more about how debt settlement may be able to benefit you, it is important to get in touch with an experienced Lilburn debt settlement attorney at Konn Law Firm LLC. Contact us today to discuss the debt settlement process.
Source:
experian.com/blogs/ask-experian/credit-education/score-basics/my-credit-score/
