Debt Settlement and Credit Score

I have about $40,000 in credit card debt. One of my friends suggested me to go for the option of debt settlement. My Fico score is 709 right now. If I settle my debts, how much will my score drop and will I be able to refinance my house in a year and a half when my ARM readjusts?

2 Answers

Settlement, no matter who handles it for you, will damage your credit score.

If you have a 709 score right now, you can expect it to drop to less than 600 by the time you're finished settling your debt, which can take six months or so. You probably won't qualify for a conforming mortgage until at least 12 months after your final account is reflecting a zero balance.

If you want to settle our debt, I suggest doing so after your mortgage is refinanced.

http://www.debtconsolidationcare.com/companies/donaldson-williams-inc/

Settlement hurts your credit score by as much as 125 points. So it is better to do it yourself. You can contact with the credit card company and try to negotiate with them. You may try to arrange a better repayment plan with them.


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