Is Credit Card Debt Settlement a Good Way to Fix Credit?
If you are overloaded with debt and have no idea how you are going to get out of it, you may be wondering what your options are. One way that you can eliminate your debt is through credit card debt settlement. This can be a good alternative for some people, but is not the right choice for everyone.
Credit card debt settlement is where you negotiate with your creditor for them to accept less than the total amount that you owe and consider the account paid in full. It works only on debt where there is no underlying collateral.
You may be wondering why creditors would ever consider settling debt. Basically, they are in the business to make money and want to get every dime that you owe them. But, they realize that getting something is better than getting nothing. As such, if they believe that you can and will file bankruptcy, they generally will be more than happy to offer you a good settlement. The key to getting the best possible settlement is convincing them that you are going to file bankruptcy and that they will be left getting nothing. If you have a high income and all of your other accounts are current, it is not likely that you will be offered a good settlement.
While getting an account settled for 40%-60% of what you owe can sound great, you need to carefully consider if it is the right decision for you. If you are looking to fix credit issues, you may want to consider other alternatives. The credit bureaus will treat a settled account in much the same way that they look at a charge off. As such, any time you settle and account for less than what you owe, your FICO score will be lowered. How much impact this has on your score depends largely on what your credit report looks like to start with.
