Debt Negotiation and Your Credit

: Chris Lee Law Firm

  Filed under: Credit

Debt negotiation can be a very useful strategy for dealing with outstanding debt. Negotiating a settlement usually means you will end up paying much less than the total amount owed to your creditors, a difference that can often be the shortcut on the road to financial freedom and solvency. But it is not all positive, and it is important to know the ins and outs before deciding what the best path is for your financial future.

Negotiation Still Affects Credit

When you (or the negotiator you choose to employ) reach a settlement with a creditor, it is often very good news; you get to make smaller payments, or the principal of the loan may be reduced, or the interest rate may have been negotiated in your favor. However, debt negotiations do appear on your credit report and do affect your credit in the negative. How much is a matter of debate, and taken on a case by case basis. What is certain is that the negotiated settlement will remain on your credit report until the negotiated amount is paid off.

Debt negotiation is useful for many types of debt, including medical debt and credit card debt; it is not typically successful when it comes to student loan debt, which is a tough debt to get settled. There are many companies which specialize in debt negotiation, but be careful when choosing one, as there are many disreputable debt negotiation companies out there looking to make a profit from your misfortune. Be sure that if you are using a company you are making an informed choice; otherwise, it may not be as difficult as you think to negotiate with creditors yourself.

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