subject: Debt Settlement Relief - Understanding Debt Settlement and Your Credit Report [print this page] Most of the cases where debt settlement happens is when the delinquent account has already been sold to a collection agency or when the creditor has already written off the debt as bad debt. Most debtors try to settle such accounts because of the persistent collection calls that they are getting or because their credit rating has been severely affected due to non payment of debt and now they again need credit to make a major purchase like a house or a new car.
A debtor should be cautious and should settle his debts much before either of these conditions are reached. Many times a settling a debt which is so old can have adverse affect on your credit rating. Any item will stay on the credit report for a period of seven years. If you try to settle a debt which is six years old, then it will reset the clock for another seven years.
Hence it is advisable not to leave settling your debt for so long. The best time to settle your debt is just before the account is going into collections. Creditors are willing to settle the account as they have to sell these accounts to collections for almost nothing.
A debtor needs to decide on how he will like to pay off his account. Will he be making a lump sum payment to his creditors or through monthly installments? Since debt settlement has a negative impact on the credit rating a debtor can negotiate a pay for delete clause with his creditors. This would mean that upon receiving a certain amount of payment on time the creditor will remove the note from his account which states that the account has been settled for less than what was due.
Debt Settlement Relief - Understanding Debt Settlement and Your Credit Report
