Does debt settlement hurt my chances of obtaining new credit?

Debt settlement can have a negative effect on your credit, but it does not necessarily mean that it will prevent you from obtaining new credit. Debt settlement is a process where you negotiate with a creditor for a lower balance on your current debt. Once the creditor agrees to a settlement, they will close your account and report the reduced amount that you owe as ‘paid in full’ on your credit report. This will result in a negative item on your credit report. This negative item will remain on your credit report for seven years, and can be viewed by potential creditors when making decisions about whether to extend you credit. However, if you have a history of otherwise good credit management and bill payment, and have been able to pay off your debt settlement amount in a timely manner, the negative item that appears on your credit report may not be as detrimental as it would be for someone with a checkered credit history. In this case, potential creditors may see that you have the ability and willingness to manage your debt, and may decide to extend you credit despite any negative items that appear on your credit report. Ultimately, debt settlement may hurt your chances of obtaining new credit, but it does not necessarily mean that it will prevent you from getting new credit. It is important to maintain a good credit history even after settling your debt, in order to give potential creditors an accurate picture of your creditworthiness.

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Does debt settlement hurt my chances of obtaining new credit?

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