How Will Debt Settlement Affect My Credit Score?
By LaToya Irby. Credit/Debt Management Expert
Welcome to About.com's Credit/Debt Management site, led by your guide, LaToya Irby. LaToya has been the credit and debt management guide since 2007. Read more
Question: How Will Debt Settlement Affect My Credit Score?
Answer: It's hard to predict just how many credit score points you'll lose due to debt settlement. but we do know that debt settlement hurts your credit score.
Your credit score might experience a similar drop if you have a credit profile similar to these scenarios. See How Credit Mistakes Hurt Your FICO Score for more information.
Debt settlement will hurt your credit score more if the credit cards you settle are already in good standing and if you end up settling multiple credit card accounts. Debt settlement information will remain on your
credit report for seven years, but will have less of an impact on your credit score the older the information gets and as positive information is added to your credit report .
You can better predict the impact of a late payment on your credit score using the FICO Score Simulator, available when you purchase the FICO Score Watch from myFICO.com.
Keep in mind that the goal of debt settlement is to get rid of some of your debt, particularly if you can't afford to pay all the balances in full. That may mean that you temporarily sacrifice your credit score - especially if you're not looking for a major loan right now - for the sake of getting out of debt. Then, once you've settled the balances, you can focus on rebuilding your credit score .Source: credit.about.com