Is True That Your Credit Score Will Move Up After Settling A Debt?

Problem:

Problem:

I have a credit card with Bank of America. The total outstanding balance on the credit card is $14,269. I was making the minimum monthly payments every month. However, things got little difficult after my mother went through a heart surgery in April 2012. My mother didn't have any insurance. So, I had to pay the entire medical bill out of my own pocket. I have not been able to make any payments to Bank of America in these few months. As a result, Bank of America (BofA) has assigned the account to FIA card services.

My credit card account is past due. Will it be better to settle or pay off the debt in full? I can try to settle the debt with FIA card services. However, at this point of time, I am mainly concerned about my credit score.

Solution:

I appreciate the fact that you want your credit score to improve. However, I want you to remember that your score is computed on the basis of your financial activities. Once you default on a credit card, your credit takes a hit.

Several people wonder how to increase their credit score. They spend a lot of money and time to raise their credit score. So, I am not surprised with your concern on your credit score.

I dislike the fact that most people are more concerned about how to fix their poor score. They don't show that much concern on how to maintain or retain a good credit score. It is quite easy to regularly pay your bills and retain your good credit score. However, it is much difficult to increase your poor credit score.

You'll understand this thing more clearly when I explain the concept of credit ecology. People try their best to conserve environment nowadays. Pollution harms Mother Nature tremendously. It hampers the ecological balance. Consider late payments as toxic waste on your credit report. Late payments make a negative impact on your credit score. You have to work extremely hard to remove this toxic waste from your credit report.

As I have said before, credit score reflects your current financial position. If you change your existing financial situation, then it will create a good impact on your credit ecology. This in turn means that your score will gradually improve.

You should not make your financial decision on the basis of your credit score only. This is mainly because your credit score will not improve after settling or paying off debt in full. You should primarily make a decision on the basis of your financial health. However, it is always better to repay the outstanding balance in full instead of settling it.

Finally, you have to remember one point before settling your debt with FIA card services. This is you'll have to pay tax to the IRS if the amount forgiven by FIA card services exceeds $600. Your total outstanding balance is $14,269. If you settle the debt for $10,000 or so, then you'll have to pay tax on the remaining $4,269. IRS will consider it as your income. You'll be required to pay tax on that amount i.e., $4269.

You can avoid paying income tax only after proving that you were insolvent when the FIA card services forgave your debt.

by: Jason Holmes

POST COMMENT

Unsecured Loans For Bad Credit Thriving Way Of Deriving Funds With No Collateral Payday Loans For Bad Credit Better Your Distressful Life Doorstep Loans No Credit Check-available At Affordable Terms 90 Day Loans For Bad Credit- Get Urgent Finances With Ease! Payday Loans For Bad Credit Succor You Fulfill Your Vital Needs Fast Unsecured Loans For Bad Credit Ideal Way To Get Money Right Away 1month Loan For Credit Union Bad Credit Payday Loans: Avoid Credit & Obtain Money Payday Loans Uk No Credit Check- Get Hold Of Money Immediately Fast Cash Loans With Bad Credit- Reliable Source To Get Fast Cash Same Day Loans For Bad Credit Respective Way To Get Money Without Credit Checking Bad Credit Cash Advance Loan: Bad Credit Is Not A Curse Payday Loans No Credit Check: Convenient Mode Of Taking Fund