How long does it take for a settled debt to stay on credit report?

Date Posted: January 14, 2023
By: Maggie Marques

How long does it take for a settled debt to stay on the credit report? A settled account will remain on your credit report for seven years since it was declared delinquent. When an account is fully paid, your lender must update your information and claim it as paid. Unfortunately, it doesn’t automatically follow that your credit report will immediately reflect the updated status.

What does a settled debt stay on the credit report mean?

If somebody looks at your credit account and sees a settled account reflected, it means that a lender has agreed to accept your payment that is less than what you owe them. As a result of a debt settlement, this creates a negative impact on your credit score.

Even if that is the case, lenders will still see debt settlement as better than loans with past due. Debt settlement is even better than unpaid loans. When you apply for a loan, there is a possibility that you will be required to settle or pay off any remaining debts. It will only be then before they can qualify you to take out the new loan.

Credit counseling vs. debt settlement

Don’t be confused between credit counseling and debt settlement because there’s a stark difference between the two. When you go for credit counseling, a financial expert will help you educate you on managing your debts. They will also give you ideas on how to improve your finances.

Another difference between debt settlement companies and credit counselors is that the former will tell you to miss payments so that you have a better chance of negotiating your debts. A credit counselor will advise you to talk to your debtors, keep making payments, and honor your commitment.

There will always be positives and negatives in your financial decisions. Answering the question of how long it takes for a settled debt to stay on the credit report should not be enough. The most important thing is to take the necessary step to get back on track to being financially healthy.

 

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