Aftermath of Debt Settlement

Definitely, the future will look a whole lot better now. That is for certain. The elimination of debt is one thing that you will really enjoy. But before you can wallow in that relief, the work is not yet over.

Before you go out and celebrate, you need to make sure you have in your hands the black and white copy from the creditor that certifies your debt had been written off. Get a written and authenticated copy that certifies your debts had been forgiven and you should no longer be bothered by your creditor for it. Some people receive collection notices even after a debt had been settled. This is the proof that you will show them so they will no longer communicate with you about this particular debt.

Debt settlement also damages your credit history. Since it requires you to miss payments deliberately, your credit score will definitely take a hit. Not only that, even after you have paid off your debts, it will be labeled as “settled” and not paid off. While that is not as damaging as a bankruptcy taint on your credit history, it still sends a message to future lenders that at one point, you had to settle your debts. It shows your credibility as a borrower.

There is nothing that you can do about that but after the settlement, it is a must that you work on your credit score to increase it. Next to bankruptcy, this is the debt relief program that has the most impact on your score. To help increase this rating, you need to keep some accounts open. Of course, this does not include the accounts that you enrolled in a debt settlement program. That will certainly be closed. But if you have other credit accounts, keep them open. Use the open credit card accounts occasionally but make sure that you have the cash on hand to pay for it in full once the billing statement arrives.

If you have current debts that has yet to be settled, like your mortgage, medical bill or student loan, you should try to pay for them regularly. Since you have had a few debts written off through debt settlement, you should be able to finance the remaining with more funds. You may have had to miss payments as you were going through the debt settlement program for the other credits that you owe. Now is the time to get yourself back on track.

It will also help your case to open a savings account. Since your credit score basically shouts how lousy you are with money, it is time to reverse that by proving that you have mended your ways. And what is the best way to show people you are financially capable and responsible now? By building up your savings. When you have a sizable amount on your savings account, your credit score will reflect that as well.