Credit ratings have grown in importance over time. Originally, reports were designed to assist lenders who considered extending credit. Today, employers routinely use credit ratings to qualify job applicants. Insurance companies may use credit ratings to increase premium charges. Government agencies use ratings to disqualify employees when applying for positions that have access to sensitive information. Overall, a poor FICO score has an adverse affect that ripples throughout modern life.
Debt settlement plans have an initial adverse affect on FICO scores. The extent of this affect however is often misunderstood. Most people who enroll in a plan already have a history of late payments. As long as payments are late, credit scores suffer. Payment histories over the last three years heavily influence scores. Anyone who enrolls in a plan with a high score should expect a significant reduction in scores reported by the three major agencies.
The purpose of enrolling in a debt settlement plan is to reduce payments, lower costs, and begin making timely payments. In most situations, discounted balances are repaid ahead of schedule. The double impact of making payments on time and paying off debts improves credit ratings over time. After completing a plan, credit ratings are frequently much higher.
Banks, credit unions and lenders of every stripe try to dissuade customers from enrolling in consolidation plans. Lenders always hope to receive the greatest recovery possible. Nevertheless, circumstances beyond the control of each borrower may prevent full repayment of loans.
The primary culprits are medical emergencies, job loss and divorce. When facing any of these situations, a consolidation plan may reduce monthly payments sufficiently to resume making timely payments. Once proof of these situations is provided to a lender by an independent third-party negotiator, lenders frequently agree that a partial recovery is far better than receiving a few pennies from a bankruptcy trustee. Professional negotiators anticipate the most influential documentation to provide by lenders in support of requested discounts. In less sever situations, reductions decrees accordingly.
The best negotiators develop a working relationship with hundreds of lenders over time. Before enrolling in a plan, consider requesting examples of prior compromise agreements reached with specific banks, credit unions and department stores. These agreements may provide valuable insight for estimating potential future discounts available.
In three years, participants may enjoy the best credit ratings ever achieved. Once completing a plan, most people find new joy through saving a portion of increased monthly cash flow.