How Long Does It Take to Improve Credit Score After Debt Settlement

How Long Does It Take to Improve Credit Score After Debt Settlement?

 In this article, we’ll discuss the important topic of: “How Long Does It Take to Improve Credit Score After Debt Settlement?”

The length of time taken to improve your credit score after the settlement of debt somewhat depends upon the size of the debt. If that’s a huge debt you were looking to settle, it may affect your credit score strongly. One must keep in mind if they don’t have a very sound credit history, it might take about 18 months or so, for the credit score to recover fully.  

How long does it take to improve credit score after debt settlement? You must be aware of the consequence of settling debt with your creditors as it impacts your credit score negatively and, on that account, it’s almost hard to predict whether the credit score will improve any time soon.  

How long does it take to improve credit score after debt settlement?

Before we get on to the impact of debt settlement on your credit score, we must understand why one goes for settlement of debt in the first place. ‘Debt settlement’ is regarded as an arrangement with your creditor wherein you can pay half the amount of what you owe to fulfil your debt need. 

But when you are going for a debt settlement however massive or small, you must know that it will remain in your credit report and will reflect for a long time unless you make some fresh and timely payments to improve it even a little bit.  

Will settling debt improve credit? It’s hard to say if it will immediately improve your credit, but considering a debt settlement is better than keeping it due for long, as that will hurt the credit score intensely. 

When this kind of settlement is agreed upon by the creditor, he updates the credit report status as “paid settled”, which is definitely better than “unpaid”. However, that must affect your credit score but not as much.  

Various factors will determine your credit score report, and we have brought together a few of them for a common understanding of everyone.  

Settle your debt

What’s most important is to understand how significant your need is, to settle the debt. It’s the best option because:  

  • It’s an arrangement that both the parties agree upon  
  • Bankruptcy is an option too, but you may not get anything out of it 
  • Workable option for the lender and affordable for you 

Avoid being sued by the creditor

It isn’t hard to avoid a circumstance like this if you take timely decisions and work cautiously.  

  • Once the non-payment period of six months has passed, creditors are likely to charge off an account  
  • Politely you can explain your situation to the creditor and come upon a common agreement to settle  
  • Multiple debts should be dealt with, in a certain way, targeting one account to settle at a time will help 

Effect of debt settlement on your credit report

The payment history impacts your credit score and credit report you had with the creditors. 

  • A credit report does not improve immediately  
  • The longer it is since you had your debt settlement, the better it will be for the report as the settlement will carry less negative weight.  
  • Late payments should be avoided and not to fall behind on bills. 

Will settling debt improve credit?

If nothing, going for a debt settlement is at least better than an “unpaid status” in the report.  

  • One shouldn’t expect the credit to improve in a month or so, and it might take up to 20 months  
  • Any later payments to be strictly avoided as they might also delay credit improvement  

Life after debt settlement

It is not all that hard that it looks, one has to regulate their spending tendencies, and you are well on your way to a financially balanced life.  

  • Start working towards building your credit history by making timely payments. 
  • Saving some money, to start with, can help too. Stash away small amounts in secret corners. 

FAQs

How long does debt settlement stay on your credit report?

When it’s your credit report status after a debt settlement, don’t expect the improvement to happen overnight. Be the one to make timely payments with your creditors and your debt settlement won’t stay on top of your credit report for long. Your good payment record will gradually reduce the negative influence of the debt settlement.  

Is Life after debt settlement hard?

Life after debt settlement is not hard if we learn to manage our finances wisely. You have to realize the need to save well and invest only in the right places, changing a few spending and saving habits can make this period smooth for you. 

Summary

It may or may not look convenient to a lot of people to improve their credit score. To avoid feeling so helpless, you might take the help of this write-up to understand a few essential points related to debt settlement and ensure you are an ideal paymaster.  

Discolsure: I am not a financial expert and it is highly recommended that you seek out a professional before making any financial decisions. Articles are informational and for educational purposes only.

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