Debt Settlement Credit Impact
One of the largest concerns when thinking about debt settlement as a bankruptcy avoidance program is the credit impact a debt settlement program will have on you. This is a very real and valid concern since your accounts will have to fall behind for debt settlement to work. Several factors should be taken into account, including:
- Your current credit score.
- Your account statuses and previous payment history.
- How much total debt you have.
- Your Debt to Income Ratio
- What other installment accounts you have.
First, take a look at your credit score. If it is already lower than the mid 600 level, then your impact is going to be much less than someone will a 700 score. If you have a perfect payment history and a great credit score, you may want to think about debt consolidation, although those options are becoming more limited with the recent downturn in the economy.
If your accounts are already behind and/or if you have missed some payments in the past, debt settlement’s credit impact is probably going to be much less severe.
Other factors you should taken into account if your current debt load and your debt to income ratio which you can calculate using the link above. Even if you have great credit, if your DTI is too high, lenders will probably still deny you for financing with the new underwriting laws that have been enacted.
Other installment payments, such as a mortgage or car payment, will help to keep your credit score up during the process.
The bottom line comes down to savings vs credit score. Your credit score is going to take a hit unless it is already very low. You have to decide for yourself whether that hit is worth you saving 40-60% of your current debt load.
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