Credit Repair after Debt Settlement


When an individual has experienced financial difficulty and has been unable to pay for his or her loans, as is the case in a debt settlement program, the negative effects of this typically reflect on their credit scores. A creditor reports an account to the credit bureau as delinquent if the debtor has not been able to sustain their regular monthly payments, as originally agreed with the lender. As time progresses, the individual's credit score will be impacted. As a result, applying for credit will prove to be a daunting task for a recent graduate of a debt settlement program, as future lenders review through their potential customer's credit report. Upon seeing that they have multiple settled accounts, these lenders may think twice before approving their applications seeing that they have a negative credit history.

Exploring credit repair

Credit repair may seem to be quite a daunting task to most. After all, it takes seven years for a defaulted account to stay on one's credit report. This period of time applies across-the-board to secured and unsecured debt—from foreclosures to repossessions, unpaid credit card bills to student loans. On the other hand, it takes ten years for a bankruptcy to be removed from your credit report. With the need for an improved credit history in order to obtain additional lines of credit, companies that offer to clean up your credit have popped up, promising guaranteed results in a short period of time. Yet how does one know if the company really has the intention to help, or if they're up to no good?

Credit repair organizations (CRO's) extend their services to customers who have had bad credit histories. The main objective of these agencies is not only to fix an individual's credit, but also to enable them to be qualify for loans and have the ability to apply for a credit card or two. Credit repair organizations also charge their customers fees ranging from $250 to $5,000. Even with the costs associated with this type of service, the promises are tempting, to say the least, and seem to offer a lot of relief, especially when you're in need of a new house or car, or had an emergency and did not have cash available.

Yet it always pays to be extra careful. According to the Federal Trade Commission, if a credit repair organization claims to wipe out delinquent accounts, bankruptcies, liens, and judgments from an individual's credit file for good, there are very good chances that this firm is merely out to milk money off of the customer. As a matter of fact, no firm or credit repairing entity is authorized to remove accurate notations on a person's credit report.

Some related articles:

How to avoid credit repair scams

How to repair credit on your own