Consider the Credit Score Downside of a Settlement

Rebuilding Your Credit

Many consumers choose to settle their debts for less than what they owe. In the lending world that practice is often referred to as a "debt settlement." But while your balance may be paid off, and the account considered to be paid in full, your credit score may still take a hit. If the creditor reports that the account was delinquent and then settled for less than the entire balance, that is seen as a serious negative entry on your credit report. When you negotiate a settlement, make sure the creditor will simply report the account as "paid in full" if you can. Even if the creditor does not agree, settling the account for a lower amount may still be the right choice, but keep in mind it likely will affect your credit score and your ability to qualify for or get credit on decent terms, at least for a few years.


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The information provided is not intended to be legal, tax, or financial advice or recommendations for any specific individual, business, or circumstance. TowneBank cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided for illustrative purposes only. You are encouraged to consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.

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