I want to get a plan to reduce my debt.How does settling for a fixed amount,say 50%,affect my credit?
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Not many Creditors are willing to settle for 50% , unless the accounts are in serious deliquent or have transfered to collections. However they can and will help you by reducing the interest rates.
It will effect your credit alot, especially it will make you look real bad to your future Creditors when you want to apply for new credits or loans.
Those settled accounts will have this status on them :
- Status : Paid in settlement. $xxx.xx written off.
And the Creditors will insert something in the statements:
- Creditor's Statement : Account legally paid in full for less than full balance.
Just as some people have already said, a settlement will most likely hurt your score. There is an interesting article from MSN money that I'd suggest you read. http://articles.moneycentral.msn.com/ban.
Also, beware if more than $600 dollars is forgiven the creditor may notify the IRS and report that portion as extra income that you will have to pay taxes come filing season!
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