What Is Debt Settlement? An Option If Your Credit Has Gone Bad

For the purposes of discussing debt settlement and learning what is debt settlement, we’ll talk about debt settlement as it pertains to a debt settlement company.
Simply put, debt settlement is the process of using a debt settlement company to manage and negotiate paying off your bad debt over time one account at a time. Bad debt is considered as – charged off and/or collection accounts.
Similar to consumer credit counseling, a debt settlement will consider your monthly income, your monthly bills, and your bad debt accounts to determine a monthly payment that you can make.
Debt Settlement companies pay your creditors off one by one. As you pay your debt settlement company you build up the money that the debt settlement company has to use to negotiate and payoff settlements with each of the creditors considered in the debt settlement program.
Once you have enough money built up in your account to pay off a creditor, the debt settlement company will negotiate with your creditor to get them to accept a payoff. When the creditor accepts a payoff, the debt settlement company makes the payment from your account. You keep making payments to the debt settlement company until you have enough money to pay off the next creditor. This process is repeated until your debt is paid off.
Make sure that along the way that you work with your debt settlement company to make sure that they get letters from your creditors that your credit has been paid. You will need these to fix your credit report. In fact, as soon as you get a letter from a creditor that one of your accounts is paid off, you’ll want to send that letter to the credit bureaus to have them update your credit report. If you do it this way, you will have less work to do when your settlement plan is over. This will help your credit rebound quicker.
The quicker your credit rebounds the quicker you can buy a home, get a car loan, and stop worrying about low credit scores.