You may have viewed commercial advertisements promising a solution to hopeless debt. Ads typically make statements such as “You can reduce your debt by as much as 60%” or “Break free of debt in six months or less.”
While these statements reflect the truth, they fail to mention how debt settlement might affect your credit rating. The process of debt settlement is typically explained in a clear way, promising to reduce the overall debt through skillful creditor negotiations. Some of these agreements could be temporarily reflected in a negative way through the major credit bureaus.
Natalia Osorio Editor of the “Credit Card Debt Counseling” website — http://www.CreditCardDebtCounseling.biz — pointed out;
“…When a consumer calls a debt reduction company, they will be asked for the names of each creditor and the current outstanding balance. Then, a reduced amount is calculated and estimated, which includes a lower all-inclusive monthly payment. All payments are made to the settlement company rather than the creditor. During the first four to six months of the agreement, a majority of the payments go into the company’s pocket in the form of fees or settlement charges. All subsequent payments are held in escrow until it grows to a larger amount, at which point a settlement counselor will call the creditors and negotiate for a lower settlement…”
It would seem that taking the settlement route is the best option. After all, who wouldn’t want to have their balances reduced to less than half of the original amount? But, because you have stopped paying your creditors all together, a few temporary negative remarks will be placed on your credit bureau, but only until the negotiation process is complete. These few remarks are easily removed simply by asking the creditor to do so.
It is important for the consumer to monitor their credit reports during and after the negotiation process. Otherwise, negative remarks could remain on your credit report. On the other hand, once the debt is paid your accounts will reflect positively, a much better option than not paying them at all. Temporary inconveniences are a small price to pay for getting completely out of debt.
“…In some rare cases consumers are required to pay taxes on any negotiated debt. If the debt is an exceptionally large sum, and if other legal factors are in place, then the consumer might be required to pay a small amount of taxes on the forgiven debt. There are numerous and atypical circumstances which must be in place for this to occur, factors which do not usually apply to the average consumer…” N. Osorio added.
Further information about trusted and reputable companies for credit card debt settlement by visiting; http://www.CreditCardDebtCounseling.biz