Debt settlement- can you recover from it?

Date Posted: March 13, 2023
By: Maggie Marques

Debt settlement is a serious matter. This debt relief option allows you to negotiate with your creditors to pay off a portion of what you initially owe them. It indeed provides instant relief from overwhelming debt, but it can also create a negative impact on your credit score.

Debt settlement- can you recover from it?

Settlement may give you a negative impact on your credit score but you can definitely bounce back from it. It will need some effort and definitely a lot of patience but it can be done.

When you settle a debt, the word “settled” will be reflected on your credit report. Once this appears, it will lower your credit score. But the good news is that it is not as damaging as compared to you defaulting on the debt entirely. The negative impact will last for a few years but it is not permanent.

Steps to take to recover from debt settlement.

There are several steps you can take to start recovering from the settlement.

  1. Pay on time. Payment history plays a big role in your credit report. Paying your bills on time is critical as it accounts for 35% of your report. If you have a hard time remembering your due dates, better set up automatic payments or reminders and you’ll never miss a payment again.
  2. Be aware of your credit report. Regularly checking your credit report is a must. You need to ensure that it is up to date and accurate. If there are errors, submit a letter of dispute to the credit reporting agencies immediately. Correcting errors will help improve your credit score.
  3. Open and maintain a small loan or credit card. You may think that being loan-free or credit-free is going to be beneficial for you. It is not. It would be best to maintain a small amount in your credit card or loan so that it will be reflected that you have a low credit utilization rate.

It would also help if you can stop getting into new debts while recovering from your debt settlement. Continue paying on time, and be responsible in monitoring your credit report and you will recover from your debt settlement in no time.

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