Your credit report is filled with information that could help or hurt you in debt settlement. You’re not the only one who can access your credit report. Creditors and debt collectors are also allowed to pull your credit report – and they will likely make decisions about your settlement offer based partially on your credit report.
Tool: Creating a Settlement List
As you probably know, your credit report contains a list of most (or possibly all) your credit card and loan accounts. Before you start your debt settlement efforts, you could use your credit report to help complete your list of accounts that you need to settle. For many of your accounts, you’ll probably have recent billing statements or balance due letters from creditors to let you know the account balance and other details. But, you may also have some old accounts that aren’t being actively collected. Your credit report could give you insight into these accounts and you could use that information to decide if you want to pursue settlement or leave these accounts alone.
Obstacle: Rejecting a Settlement Offer
Creditors and collectors will likely look at your credit report, especially when you tell them you can’t afford to pay your balance in full. They may use your credit report to make their own decision about your ability to repay your debt. If creditors see that you’ve kept up payments on other accounts, but you’ve neglected to pay the accounts you have with them, they may use that as a reason not to accept your settlement offer. They could also look to see whether you have enough available credit on an account to transfer their credit card balance to that account.
Tool: Strengthening Your Settlement Argument
While creditors may try to use your credit report information against you, that information could actually work in your favor. If you’re behind on all your payments, creditors could conclude that you’re not in a position to catch up on any accounts. After another creditor has posted a settlement, creditors might be even more inclined to accept your offer because they’ll see that you’re not bluffing when you say you’re settling all your accounts.
Obstacle: Closing Out Accounts You Want Open
There’s another way a creditor might try to use your credit report information about you. Let’s say you want to leave an account out of the settlement, perhaps because you want to maintain a good relationship with that creditor or you want to keep that card out of settlement to use for emergency situations. You might do this if you have a car loan and credit card from the same bank or a credit card with the same bank as your primary checking account. If that bank checks your credit report, as part of their business practice, they may close your account when they see that you’re settling accounts because they now see you as a credit risk.
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