Dealing with your debt could be difficult. As a credit repair company, we recommend before settling any of your accounts, that you request a debt verification to ensure that you are paying a legitimate collector. Especially if your debt is old and has been sold or transferred to a third party. In other words, credit repair should be the first step of the process since it will remove all the unverifiable items and errors from your credit report.
Here are some important points that should be taken in consideration before you decide to enroll into a debt settlement program:
- Your credit report could have a negative impact since the debt settlement companies encourage you to stop sending payment directly to your creditors – On the current/opened accounts.
- It is better to do a settlement in accounts that are already in collection. Settling may be a way to resolve the debt, but neither missed payments nor settled debts are good for your credit risk
- Settled accounts will be listed on your credit report as paid for less than the full balance.
- Failing to fulfill the contractual agreement with the lender is an indicator of increased credit risk. That will impact your credit scores.
- Tax Consequences- any savings you get from debt relief services can be considered income and taxable. Credit card companies and others may report settled debt to the IRS, which the IRS considers income.
- You don’t need to hire someone to help settle your debts, but it may help — just watch out for scams.