Debt Settlement and Credit Rating
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- Debt settlement is for consumers with large debt burdens
- Debt settlement can resolve debts for about half of what you owe
- There is a cost to debt settlement, as credit will be negatively impacted
If I get help to settle my debt, do I lose my credit card?
If I get help to settle my debt, do I lose my credit card?
If you decide to hire a debt negotiation or debt settlement firm, the firm will ask you to close your credit card accounts. The settlement firm will not be able to settle your debts, if you continue using and paying on the account.
Generally, I advise you to make sure that any firm you choose is a member of the AFCC (American Fair Credit Council), the leading debt settlement industry trade group. AFCC members follow all the rules set down by the FTC, as well as a strict set of guidelines from the AFCC itself.
Quick tip:
You can receive a free analysis of your debt relief options from one of Bills.com's pre-screened debt relief providers.
Credit card companies will not settle with debtors until the account is around six months delinquent, in general. This means that you must choose to stop paying your creditors each month in order for the settlement company to obtain a settlement. No credit card company will allow a cardholder to keep an account open after not paying for six months. Nor will a card company allow a user to continue to use an account after agreeing to accept a settlement amount to pay off the balance of the account. If you are interested in debt settlement, I encourage you to visit the Bills.com debt relief resources page.
I hope this information helps you Find. Learn. Save.
Good luck,
Bill
VIDEO: Debt Settlement - What is Debt Settlement?
Debt statistics
Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Oregon, 15% have student loan debt. Of those holding student loan debt, 8% are in default. Auto/retail loan delinquency rate is 2%.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.
