One of the most common questions people ask about debt settlement is: does it ruin my credit rating?

A lot of articles have been published from some sources that claim to be experts on debt settlement and thy have totally missed the boat; so to clear things up, no debt settlement doesn’t ruin your credit. It also doesn’t have any positive effect on your credit either until your debts have been settled and your debt to income ratio starts to improve.

The reason is, and chances are, your credit is already ruined or heading in that direction if you need help getting out of debt.

You should go to the Equifax website Here and order a “score power” copy of your credit report for $23.95. Go on a fact finding mission and discover where you are in the credit world before you assume your credit is good or bad. What we have found is most people have no idea what their credit score is.

If you are maxed out on your credit cards, and even if you are making your minimum payments your credit rating is going south. If you don’t believe that’s true, then check your credit report yourself. The fact remains, if you are at or near the limits of your credit line your credit score is going south because almost half of your credit score is based on how much debt you owe versus your limit available.

So if your credit is bad, why are you trying to protect it? All your credit gets most people in the first place is usually a bunch of debt.

Remember If you can afford to pay off your bills in full and protect your good credit then why would you consider a settling your debts for less? Those that can qualify for debt settlement will be pleased to know that it is usually the most affordable and fastest way to get rid of your credit card debt.

Debt settlement is not an option for people with great credit that regularly pay off their credit cards on time. It’s really for people already experiencing collection harassment or finding they are on a hamster wheel robbing “Peter to pay Paul”. If you can look at your credit card statements for the past 6-12 months and have noticed that the balances are going nowhere but north you should look at getting a debt settlement consultation and doing something about getting out of debt.

Usually the worst thing you can do to your credit is file for bankruptcy. Bankruptcy should only ever be considered as a last resort after you have explored and exhausted other methods of debt relief. Second to bankruptcy is credit counselling services or a consumer proposal, these plans run on average for 60 months, and place a R7 on your credit report. Credit counselling does not reduce the principal you owe.

A debt settlement plan will get you out of debt in 1 month if you are a qualified homeowner or in 24-36 months if you are not. Unlike credit counselling and bankruptcy, with a debt settlement company you can still qualify for a mortgage to consolidate the debt you owe and you often pay back about half of what you originally owed. $50,000 in credit card debt could be settled and gone in one month with a $25,000 second mortgage.

Many Canadian’s are still in their homes today because debt settlement saved them from going bankrupt. Homeowners should do their homework and ask questions, only deal with a company that is well respected within the mortgage community and has been settling debt with the proceeds of mortgage financing for several years.

Remember there is no form of debt help that offers an immediate improvement to your credit score and you can only qualify to settle you are experiencing financial hardship.

The only real way to have a good credit rating is to pay your bills in full every month and not carry a balance. If you have to carry a balance always keep it below 50% of your credit limit and pay it off sooner than later. Otherwise even if you make the minimum required payment your credit score will start going south. If you are suffering financially then debt settlement will always be the quickest path to total debt freedom and do the least amount of damage to your credit rating.

If you feel it’s time to do something about your debt, and want a free debt settlement consultation then please visit our home page and request a no obligation quote.