What Happens To My Credit After Debt Settlement?

Nov. 29, 2009 - PRLog -- They are often turning to debt settlement as a form of help. Debt settlement lets allows you to have your bills consolidated into one easy monthly payment. The debt settlement companies also negotiate with your creditors. This can result in your balances being lowered and late fees waives. Sounds like a good deal if you are in debt over your head. What happens after the debt settlement though? Is your credit report affected? Will you even be able to get credit again?

Hector Milla Editor of the "Best Debt Settlement Companies" website -- http://www.BestDebtSettlementCompanies.org -- pointed out;

“… Settlement of your debts gives you relief from the large monthly payment on your bills. Keep in mind though that certain things take place when you work with a debt settlement company. It is true you can end up settling your debts often for as much as 50 percent off the balances. Some creditors will also waive fees and reduce your interest rate. These are all the benefits of debt settlement …”  

Unfortunately, it can lead to some negatives as well. The information from the debt settlement company is sent to the credit report companies. It then shows on your report as "paid settlement" or "settled debt". When this happens and a new creditor reviews your report for a loan or credit card that you apply for they will know that you had to settle your debts and obviously had financial difficulties.

This will make them much less likely to approve you. If they do accept you the interest rate will be substantially higher than if you had good credit. There are credit cards for people with bad credit out there though. They usually involve extra fees though and may even need to be secured with a bank account.

“… That is not the only downfall though. There are sometimes when you have to report the savings from your settled debt as income. This means that if you had $10,000 in debt that was reduced to $5,000 the difference of $5,000 will have to be shown as income. If you are notified that you have to claim this as income contact your tax preparer for further advice.Therefore, as you can see, like most things in life, there are pros and cons to debt settlement. It is one very effective way to get out of debt though and works in your favor more than claiming bankruptcy would …” H.Milla added.

Further Information about how to get the most of your debt settlement process By Visiting;
http://www.BestDebtSettlementServices.com