Will Debt Settlement Show Up in a Credit Check?
By LaToya Irby in Credit Repair Debt Relief
One of the biggest questions you might have about debt settlement is how it will affect your ability to get credit after you’ve finished settling all your debts. Not only could the answer to this question affect your decision to proceed with debt settlement, it could also impact the steps you take to repair your credit should you decide to go through with settlement.
Whether debt settlement goes on your credit report is entirely up to your creditors. Most of the time, creditors do update your account to show that you settled the debt. The account will probably specifically state that the account was settled or it will have wording that indicates you paid less than the full balance due. These remarks, like most other negative information, could stay on your credit report for up to seven years from the date of the settlement.
When debt settlement is listed on your credit report, it typically impacts your credit score – but likely more so in the first few months and years after the settlement is complete. With time, the debt settlement probably impacts your credit score less especially as you add positive information to your credit report like timely credit card payments.
If the debt settlement is listed on your credit report, it can show up in a credit check, depending on how the company pulls your credit report. If the company pulls your full credit report, they’ll be able to see all the remarks for each of your accounts. They’ll be able see each of the accounts that were settled.
While debt settlement would then show up in a credit check, it won’t always count against you. In the first few months after you settle, you might have a hard time getting approved for new credit cards and loans. That’s likely because the negative history is so recent. If you’re trying to rebuild your credit history, a secured credit card could be a good option. You make a security deposit against the credit limit, so your credit history is given less significance in the approval decision. Just make sure the secured card issuer reports your payments to the credit bureaus each month so that your timely payments help your credit history.
Before you apply for any credit, review your credit report to make sure everything about the settlement is reported accurately. That means your account balances should all be $0. The accounts should be closed and the remarks can indicate that the account was settled. If the “settlement” remark is missing, it’s not a big deal. The most important thing is that you don’t have an outstanding delinquent balance – that could keep you from getting approved for major loans like a mortgage or car loan.
Whether debt settlement counts against you in a credit check depends on what you’re applying for. Financial institutions and insurance companies may penalize you for having settled your debts. Employers and landlords may be more lenient with a past settlement, especially if you explain the situation beforehand. Remember that debt settlement only stays on your credit report for no more than seven years, so in less than a decade, you won’t have to worry about the effects at all.