The Good, The Bad And The Ugly Credit Score

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by Krista Scruggs

 

What happens to your credit score when you seek to resolve debts? If you choose the most popular corm of reducing debt via credit card debt settlement, then the answer may scare you.

What happens to your credit score when you seek to resolve your debts? If your choose the most popular form of reducing debt via credit card debt settlement, then the answer may scare you. American consumers today are feeling the financial constraints of the economic downturn. Many are collecting debt as their income may be slashed, jobs are lost or investments turn sour. Fixing your credit card debt by negotiating with your creditor for a reduced amount owed is not without setbacks.

 

During the credit card debt relief process, which can take up to three years, your credit score is adversely affected. That is why it is important to know what other options are out there before you go through with negotiations. It is equally important to prioritize your values with regard to a debt and credit score. If you plan on making a stable income in the future and do not want to destroy your credit then maybe a credit card debt settlement is not for you. For these people, they may choose a Consumer Credit Counselor program. This program is right for those not in a dire need to pay back large debts or are just barely short on making payments. A credit counselor reorganizes loans and debt, sometimes consolidating them into a lower interest monthly payment. The overall amount owed is not significantly lower but it does lower your interest rates and helps the debtor pay back the creditor in a shorter amount of time without touching your credit score.

 

Unfortunately, there are those so deep in debt that they may be forced into filing bankruptcy. Bankruptcy completely demolishes your credit score as well as everything you owe. So credit card debt settlements may be able to settle a 30-70 percent cut in your debt and help you avoid filing bankruptcy. The downside to this is that your credit will drop. Let's say your credit score is placed on a hundred-point scale. Perfect credit is 100 and bad credit starts at 80 and below. Let's say entering a credit negotiation you have 100. It would be not be a surprise to see your score plummet to 60 points by the end of the settlement. While 60 is not as bad as bankruptcies affect on credit, it will be a lot of work to start rebuilding your credit to a functioning rate.

 

It is also important to know that the longer your debt plan with the creditor runs, the more time you are wasting in rebuilding credit. So it is optimal to be able to pay back debt in a shorter amount of time. Sometimes the debtor does not have the luxury of competing a short-term plan and so the debtor will have to bite the bullet and watch their credit score get shot down.

 

Reducing debt and saving your credit score is a lot like a western shoot-out. The quicker the "problem" is handled, the less chance you get burned. Shooting down credit card debt grants you many options. Unfortunately not everyone has these options available. That is why you must research only the option of a long-term debt settlement plan then your credit score will be injured, but at least you remain financial alive. In order to find out more about credit card debt settlementBusiness Management Articles, you can visit our site www.debt-settlement411.com/

 

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About The Author:

Orange County resident, Krista Scruggs is a contributing writer for Debt-Settlement411.com.

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