Debts that have been charged-off or sold to collections agencies are extremely toxic to a borrower’s credit report. Entries listed as “charged-off” or “collections” are like pieces of radioactive waste.

Creditors will not touch a borrower whose credit report has these entries listed. Debt delinquency is a serious financial condition that can result in the borrower being cut off from almost all forms of credit. Debt settlement is an unregulated procedure that can potentially reduce the amount of debt owed by a significant percentage.

For example, a borrower who settles a $100,000 debt for 54% only has to pay the creditor $54,000.

Settling a charged-off debt or a debt that has gone to collections changes the listing on the credit report to “settled”. This can result in an improvement to one’s credit score. Even if the borrower went into the debt settlement process with bad credit, settling his debts does not do any more damage to his score.

In fact, under certain circumstances the credit score is actually raised by settling debts. When the borrower has decent or good credit, using debt settlement can harm his credit score significantly.

Borrowers with credit card debt problems are able to settle those debts for less than the full amount. A good debt settlement company can even get creditors to request that negative information be removed from a credit report. This is done in exchange for the settlement.

This tactic usually only works when the borrower is seriously delinquent and has not paid his creditors for 90 days or more. Debt settlement companies negotiate with creditors to request that the entries they report to the credit bureaus are marked as “settled” or “paid” in exchange for the settlement.

Unfortunately, the end results of debt settlement can leave the borrower worse off. Future creditors will not view a borrower with settled debts favorably. It does not matter what type of debt was settled.

Credit card debt problems that were settled for less than the full amount will follow borrowers around for quite a while. Depending on the length of the delinquency period, settled debts can stay on a borrower’s credit report for up to seven years after the first date of delinquency.

It is important to note that this has nothing to do with the settlement itself. Debts that are delinquent longer than 120 days automatically fall into the seven-year category.

Debt settlement, like bankruptcy, is a last resort for borrowers who are in trouble with their creditors. The process varies considerably in terms of time. The purpose of debt settlement is to arrive at an amount mutually acceptable to both creditors and borrowers.

Settling a debt can improve a borrower’s credit score only if they have been delinquent for so long it cannot hurt their credit score even more. Aside from this circumstance, debt settlement usually has a profoundly negative impact on a borrower’s credit report.

Paying Paul is here to set the record straight on loans, bankruptcy, debt settlement, credit counseling, credit card debt problems and all the other options available for people seeking help to get out of debt;

http://www.PayingPaul.com is the web’s leading resource for savvy consumers seeking information and solutions for their credit and debt.

Note from Editor:

There are conflicting views on debt settlement and the two articles below offer a different perspective.

Related articles

• Drafting a Debt Settlement Letter (debtsettlement.com)
• Five Creditor Objections to Debt Settlement Offers To Be Ready For (debtsettlement.com)

Cover of Getting Out of Debt (Pocket Guides)

Getting out of debt is not easy but nor is it as hard as some people think. One first has to develop a deficit free mindset which is the opposite of a deficit ridden mind set. Concentrate on paying off obligations rather than allowing the mind to accept more financial bondage.

Many people believe that they can get start to invest their money before getting out of debt which of course is possible but is not financially prudent. The most important goal is to first eliminate obligations and once deficit is eliminated one can look at investments. However, one must, while working to eliminate financial obligations, begin to build a savings account.

Build an emergency savings fund of at least five hundred dollars, preferably one thousand dollars, which will be used instead of a credit card in case of an emergency. Once the emergency savings fund is in place start to pay off the credit card balances one at a time. Start with the card with the lowest balance by sending in as much as can be afforded each month from one’s household budget.

Once credit card debt is paid off it is time to start paying off the house mortgage. Many people believe that because they have a thirty year mortgage that they have to take thirty years to pay off their house. But the longer one takes to pay off his mortgage the more finance charges he will pay when that money could be placed in a savings account.

After credit card debt and automotive debt is erased it is time to pay off the mortgage. Most people cannot contemplate the idea of paying off a thirty year mortgage because they see the loan as, what is called, a thirty year mortgage. But the truth is one need not take thirty years to pay off a thirty year loan.

A home mortgage can be paid off in half the loan’s life or even sooner in some cases. Start by sending in two checks each month one for the home loan payment and another check to pay off the principle balance on the loan. Paying off the principle reduces the finance charges and also hastens the loan payoff and also builds confidence and a financial freedom mindset.

Getting out of debt does not have to be a gigantic undertaking but eliminating debts will only happen through concerted effort. Start by building a savings fund that will be used in emergencies instead of relying, like most people, on credit cards for emergencies. Start to pay off the lowest debts and once the lowest debts are paid off move on to the next financial obligation and build the momentum towards financial freedom.

Top tips on how to get out of debt now in our review of chartered accountants and everything you need to know about how and where to find the best accountants London

Many debt laden people are finding that software tools are helpful – such as this program on sale at Amazon.

The Debt Optimizer – Debt Reduction Software
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The Debt Optimizer is a program that will manage, reduce, and eliminate debt – automatically! No change in lifestyle is required, and no extra payments are needed in order for this program to work. This program will eliminate years off your mortgage, and save you hundreds of thousands of dollars in interest payments in the process using its revolutionary debt reduction algorithms. Unlike other similar programs, no refinancing or home equity loans are necessary. Compare with any other programs on the market, and if the Debt Optimizer isn’t able to reduce debt as fast or faster, we’ll give you your money back!

Others prefer to follow advice from counselors on how to reduce their debt.

Normally the most common option that most people try to reduce debt is dealing with the creditors themselves to try to tackle the issue on their own. And the fact of the matter is that doing this doesn’t always work. The reason why it is almost impossible to do this on your own is because creditors do not care much about your situation.

All they simply want is your money. And the longer you’re in debt, the more money they can make from you. This is a lose lose situation unless you have some sort of professional experience on your side.And professional experience is available from debt relief services that has been around for decades. And experience counts a lot especially when you have thousands of dollars at stake.

The last thing you need at this point is to make a mistake and cost yourself a ton of money.And these professional debt relief services can reduce your debt by up to 50% or more if you qualify.

So if you would like to finally get back to that lifestyle you lived before debt became a problem, the best thing you can do is to make use of the professional experience that is ready to help you out.

Just be cautious about who you do business with. Not all counselors are equal.