9 Ways to repair credit with settlement
When you attempt to settle your debt, you're likely to take a hit on your credit score. That's because, by the time you start settling your dues, you may have had a number of late payments recorded on your credit report. Moreover, if you're on a debt settlement program, you must have stopped payments to creditors for several months. Not paying your creditors for months tarnishes your credit and reduces it by several points. But you can repair credit after a settlement and make yourself eligible for further loans and credit.
How do I repair credit with debt settlement?
Just follow the 9 simple steps if you'd like to improve your credit score after a settlement.
1. Check the status of accounts on your credit report:
Once you settle the dues, your credit report should reflect the accounts as "Satisfied" or "Settled" instead of being reported as unpaid and delinquent. Otherwise, your credit won't be able to rebound.
2. Negotiate account status with creditors:
You can reduce the credit effects of settlement by negotiating a Pay for delete agreement with your creditors. On doing so, the creditor will remove all information about the account from your report, after you've settled and paid back the dues on that account. You can also request your creditors to update your account status as "Paid in full" or "Paid as agreed". This can be helpful in bringing your credit back in order.
3. Apply for a gas/department store card:
It's easy to qualify for a gas/department store card even though you may have settled your dues. You can request your credit lines to be raised once you're able to repair credit with settlement.
4. Keep some credit accounts open:
It's better to not close more than 1 or 2 accounts in every 6 months time. Closing several accounts all at a time will raise your credit utilization ratio (credit used/credit available) thereby affecting your credit score in a negative way. Therefore, you need to select the ones you'd like to close without affecting your score. While doing so, keep at least 1 or 2 oldest accounts open along with a few others. That's because length of credit history is an important factor responsible for a good credit score.
5. Open a savings account:
Try to put down a certain amount of cash every month into a savings account. Having done this, you'll minimize chances of late payments on your bills and save your credit from getting hit.
You can utilize the savings account by taking out a loan with the account deposit as your collateral. You can also use the account funds as a security for a secured credit card. The credit line of the secured card equals 50-100% of the funds deposited in your savings account.
6. Get a secured credit card:
It is easy to get a secured card even though you may lack a good credit history. While you may use the card to purchase items, try to make the minimum payment by the due date.
7. Repay dues you haven't settled:
To repair credit with debt settlement, start paying off those bills which you haven't settled till now. For instance, if you have dues on your rent or mortgage, student loans and auto loans, try making regular payments and avoid being delinquent on any of these accounts.
8. Avoid using payday loans:
It's better to not take out payday loans as because once you miss a payment, you're likely to face interest charges resulting in high APR. In case you can't pay the charges by the due date, the payday lender will again charge high interest, which could lead you into trouble with your payments. Thus, you may end up in debt again.
9. Join a credit union:
If possible, get membership of a credit union. On doing so, it'll be easier for you to qualify for loans and credit, and making on-time payments on such accounts will help boost your credit score.
Although settlement hurts your credit, yet it's an effective way of eliminating your debt problems. So, if you're in financial hardship and you're unable to make monthly payments, you may settle your dues and then go for a credit repair so as to raise your credit score and increase your creditworthiness.
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#1
12-13-2009, 08:46 PM
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Guest
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Sub:
9 Ways to repair credit with settlement
I've sucessfully settled all my credit cards ($180k total) all my CC are closed at this time and were reported as "CO" which I think means either Charged Off or Colection, in any case I now have only my mortgage and car loan which I was never late on always pay on time, hav eno other debts. Depends on which Credit Agency I use my credit score 6 months after last settlement is somewhere between 620-660 so question is how to I improve this? do I need to just wait another 6 months, pay off my car loan, try to get new credit card and pay on time? what I'm real wondering is if I do nothing just keep paying mortgage and car loan as I do now will this move my credit score higher over the time?
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#2
12-14-2009, 12:23 AM
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Sub:
Good standing accounts would definitely make your score look better. Hence, it is important that you stay current both on car and mortgage loan. Also, since you have successfully settled your debts that too would improve the score eventually. However, adding some prepaid credit cards to your report may help it in improving faster.
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#3
12-14-2009, 06:39 AM
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Join Date: Jul 2009
Posts: 442
Credits: 5,307
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Sub:
Thanks SC. I too was wondering how to improve mine after I settle. Right now I am making monthly payments to Discover, Chase and Capital One. They were in debt management program, but I am now paying them myself. (The payments are small and managable, plus the balances are low) I've been on time for last 3 months. My mortgage has been on time and my car loan.
I will probably look to get a prepaid credit card after my settlements to build the score up faster. I am co-signer on my daughter's lease, and right now she's stuck where she is because of my credit score. She's bipolar and has limited income. Anyway, I sure am better off right now than I was this time last year. 
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#5
12-14-2009, 07:03 AM
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Join Date: Jul 2009
Posts: 442
Credits: 5,307
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Sub:
Unregistered
You misunderstand. I did not ruin my daughter's credit. My daughter has no credit because she makes only about $5,000 a year because she cannot work full time because of her illness and medication side effects. She's not eligible for rental assistance because she works. I insist she work for her self-esteem and to keep her occupied. Because of her income, I have to co-sign for her studio apt. and I'm not even going to get into how this illness has affected her life. It's not the appropriate forum.
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#6
12-14-2009, 07:44 AM
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Junior Member
Join Date: Dec 2009
Location: NJ
Posts: 60
Credits: 876
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Sub:
I often wonder about those who post critical msgs, suggesting that we who are trying to recover from a bad situation.
My guesses are a. They actually work for collection agencies and are trying to learn what we are exchanging ideas on so that they can combat against them. If this is the case they are proving how foolish they are. Taking shots at us will not change anything. They would do much better to sit back and lurk, gleaning information. b. Or they are people of such low esteem for themselves that they need to find someone with a problem they can point at and criticize in order to make them fee better about themselves. to them that are here to regain controle of their lives I say WELL DONE! Push on. To those who have other motives Romans 2: 1-16 Therefore you are inexcusable, O man, whoever you are who judge, for in whatever you judge another you condemn yourself; for you who judge practice the same things.
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#8
12-14-2009, 03:13 PM
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Junior Member
Join Date: Dec 2009
Location: NJ
Posts: 60
Credits: 876
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Sub:
Unregestered guest, so sorry, you seem to have missed my point.
[QUOTE=Badabing;507480]I often wonder about those who post critical msgs, suggesting that we who are trying to recover from a bad situation. 3 And do you think this, O man, you who judge those practicing such things, and doing the same, that you will escape the judgment of God? 4 Or do you despise the riches of His goodness, forbearance, and longsuffering, not knowing that the goodness of God leads you to repentance? 5 But in accordance with your hardness and your impenitent heart you are treasuring up for yourself wrath in the day of wrath and revelation of the righteous judgment of God, [QUOTE] Have a Great Day
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#11
12-15-2009, 09:33 AM
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Guest
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Sub:
I am in the same situation too.I got a lot of phone calls everyday, some of them are cool and some are rude. I am in financial struggle considering the fact that I am a single mother of three and my child is in and out of the hospital. bills are mounting, to a point that i feel not ignoring all those phone calls. i feel frustrated and hopeless. almost all my debts are placed in collection agencies. my question is . is it possible for me to settle these debts with the original creditors, for example Chase Bank even if it has been placed in the hands of collection agencies? please. i need some advices. give me some lights on this. thank you
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