How Long Does a Debt Settlement stay on your Credit Report?

Facing a Difficult Debt Situation As the most recent financial crisis shows, it is easy for anyone to find themselves in more debt than they can handle, especially …

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Facing a Difficult Debt Situation

As the most recent financial crisis shows, it is easy for anyone to find themselves in more debt than they can handle, especially if unusual circumstances arise. This can include the loss of a job, medical expenses or divorce. When you do get behind on your debt, it can create a difficult situation, especially when debt collectors are calling all the time.

Once you are behind on your debts, it can seem like the situation is impossible to resolve. However, the first step in dealing with your debt is to understand it is not the end of the world. Whatever your circumstances, there are ways to deal with it and you can recover from a bad situation. It may take time and effort, but it is often possible to restore your credit within a couple of years if you take the right steps.

Dealing with Debt

Even if you are in the middle of a difficult financial situation, there are several steps you can take to deal with your debt problems. The important thing to do is to avoid making some common mistakes. These include:

  • Familiarize yourself with the current debt collection laws. There are limits on what debt collectors can and can’t do.
  • Don’t be intimidated by or embarrassed by debt collectors. Look at the issue as business, not personal. Use your knowledge of the debt laws to keep them at bay.
  • Understand your situation. It may be difficult, but organize your bills and understand what your situation is. You don’t have to open every debt collection bill or letter if you have a basic list and keep it all organized.
  • Follow a plan. If you get a new job or some kind of income starts again, tackle your bills in an organized and planned manner. One step to take is seeking to settle debts.

Settling Your Debts

Once you are behind on your debts, it does not do further damage to your credit to settle debts for less than the amount owed. Settling can stop interest charges and fees and help you stop any further collection actions. Depending on your situation, it is often possible to settle for as little as 50 percent of your debt or less. When you settle a debt, it will show up on your credit report for seven years. If your debt went to collection, it will show up for seven years and six months.

 

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