How Settled Debt Accounts Affect a Credit Score

When you lag behind your debt payments, your creditors are in position to notify credit bureaus about your situation causing your credit score to drop. With a settled debt account, your creditor agrees to accepting a payment for less than the actual balance owed and the creditors writes off the remainder of the debt. Overall settled accounts do have a negative impact on your credit score.

All lenders will check your credit report to see the trend of your credit stats. If the credit report shows a history of failure to pay off debts then the lenders are least likely to approve you for a new credit product. If you settle an account for less than the originally agreed rate you agreed to, when you took the loan, then this will reflect badly on your character from a credit underwriting perspective.

Credit bureaus will determine your credit score at all data related to your credit performance based on different factors. Having settled accounts will have a negative impact on your credit score based on your payment history. Each settled account that you accrue, remains indicated on your credit report for at least seven years since the last account activity. However a settled account can impact your ability to borrow money in future.

Despite the fact that negative credit events that remain on your credit report for up to seven years, your recent credit activity has a stronger impact on your credit score. If you diligently pay your current liabilities on time, this will have a positive impact on your credit score. By keeping low balances on your revolving credit lines can improve your credit score. Avoid applying for credit too many times, as this will show your levels of desperation.

When you settle debts, with time you will increase your credit score slightly which will be a good thing. When your successfully settle an account you will have a peace of mind, and no longer have to deal with letters and phone calls from creditors or the possibility of creditors legal action against you. It is therefore important that you try and settle a debt, which will have a positive impact on your credit score. You should avoid taking too much credit, so that you are able to monitor your credit ratings and avoid having too many debts to settle. It is essential that you make an effort of keeping a good credit report.