Avoid settlement of credit card debt to let your credit score unaffected

Debt Consolidation 227 views

So often people encounter the situation of rising debt on their credit card due to excessive spending, which ultimately compels them to constantly default on the payment of bills. Guess what happens, the credit score worsens and makes individuals virtually ineligible for loans that they may require in the future. Looking at such complications, one can think of using the option settlement of credit card debt with the lender. The word 'Settlement' here means negotiating with the lender to waive off the entire or part of the outstanding dues so that one can easily repay the debt. Suppose the outstanding due on your credit card has risen to Rs 1.5 lacs and you agree for a settlement amount of Rs 1 lac in 4-5 part payments and get away by paying the agreed amount. But there is a catch to it and has been explained below.

Credit score takes a hit If you go for the settlement option of your credit card dues, your credit score will get affected by being shown as settlement in your credit report. As a result, you may become ineligible for any loan that you could require in the future.

Right time for settlement The settlement of credit card debt is right only when no other options are available with you. You have the option to either take a personal loan at low interest rate or loan against fixed deposit or any security to pay off the credit card debt. This will not only help you pay off the debt but can also bolster your credit score. It will ultimately be a boon to you while you apply for loans in the future. 

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What if you have used settlement option? There is a way to avoid the ill effects of settlement option if you have availed it. You can pay the remaining balance along with the interest sooner you get the funds to do the same. Doing this will make the statement read as paid full, take away the settlement blot from your credit report and thus improve your credit score.

Don't avail settlement option at young age When you are young say 30 years old, then stay away from settlement of your credit card debt as you could require loan in the future as you will have a lot of time in your life if you remain healthy and stay away from any unfortunate incidents. If you are forced to avail settlement option due to job loss or any other reasons, make sure you contact the credit counseling centers. They will help you with a suitable solution. The services of these centers may come free or at a certain price. Check out the same and avail the services.