How Can Debt Settlement Actually Lead to Improved Credit

I cannot emphasize the importance of a good credit score enough, however when minimum payments are taking over your life, you are most likely one slip up away from damaging that score, and not in a position to enjoy the benefits of a high credit score. The reason for this is that many companies design their framework with the intention of giving you temporary financial relief (via a line of credit, loan, credit card, etc…), while leaving you with almost impossible to meet interest payments.  The benefit for the company is that if you are to pay off your debt, you will more than likely pay far more than the actual balance of your account.  It is very common for people in debt to live under the extreme pressure of financial creditors while attempting to make minimum payments in order to maintain a high credit score.  Ironically, many times a consumer will use a high credit score, to procure another line of credit in order to help pay off the debt they are already in…it is a slippery slope that we are all vulnerable to slide down. Everyone in need of debt settlement will not necessarily have similar credit scores.  Some may be in extremely good standing and some may be on the complete opposite of the spectrum.  The fact is, that everyone who engages in a debt settlement agreement, will see their credit score initially drop. Debt settlement cannot begin until you default on your accounts, and each time you default on an account it will hurt your credit.  For those with credit scores that are already low, this may not be a big deal, but for those with good credit scores, this can be a frightening reality.  However, credit is not an inanimate object, it is a living breathing number that can be raised by exercising fiscal prudence.  

If Debt Settlement Will Damage My Credit, How Can It Help Build My Credit Back?

When you enter a debt settlement agreement, you will be dealing with experts who are dedicated to getting you out of the debt that is making your life more difficult.  Once you are out from under the pressure of your debt, you will find that you can finally save money again, make reasonable payments, and enroll in programs that are there to help build your credit.  For instance, imagine a hypothetical situation where you are paying off debts at a rate of 2 thousand dollars a month and you are making 3 thousand dollars a month.  That leaves you with very little to spend on life’s essentials.  Once you get that debt settled, you now have the ability to use your 3 thousand dollars to rebuild your credit.  The freedom of not having crippling debt, will allow you to make financially intelligent decisions, and begin to rebuild your credit.  

What Options Are Out There For Me to Help Rebuild My Credit?

Everyone’s situation is going to be a little bit different.  Therefore, some options might not be available to you based on a variety of variables specific to your circumstances.  However, there are options out there, including but not limited to:

• CO-SIGNER If you are lucky enough to have a family member or friend to co-sign on a credit card, car payment, apartment lease, or one of many other “lines of credit” and in conjunction with your newly found financial freedom, you can build back your credit by making on-time payments.  It won’t be an instant fix, but building credit should be seen as a marathon, not a sprint.

• CREDIT CARDS MEANT TO BUILD CREDIT If you cannot find someone to co-sign, it will be difficult to acquire a traditional credit card.  However, there are many credit card options that will start out with a very low line of credit and a very high-interest rate.  These are built this way because the lender is taking a chance on someone with a low credit rating.  But this type of card can be instrumental in rebuilding your credit.  For example; If you get a credit card that gives you three hundred dollars in credit; set up a specific amount you will put on that card every month, and pay that off of your card from your bank account like clockwork.  Remember, it is a marathon, not a sprint.  As time goes by, with regular payments being made, most companies will offer you higher lines of credit and potentially even new cards with more favorable interest rates.

• GOVERNMENT RESOURCES The United States government, via www.usa.gov, offers easy links to many programs and viable options for people in many different credit situations.

There is no cookie-cutter solution that is right for everybody, but there is most likely a solution that is right for you.  If your debt is out of control, please contact us.  Our dedicated team of experts can help put you on path toward financial freedom.

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