While repaying a credit card debt can provide immediate financial freedom, it also often causes a credit score to drop. Once you have settled a debt, it is important to rebuild your credit if you have future financial plans. This article lists useful ways to improve your credit score after a settlement.
Impact on credit score
In debt settlement, a debtor negotiates to pay less than is owed to creditors. While this may relieve some immediate financial burden, a settlement typically remains on your credit report with the status of “settled,” which can dissatisfy your credit score and represent you as a risk to future lenders.
In conclusion, while the payment of credit card debt can have an immediate positive impact on your credit score, adopting proactive credit management and responsible financial behaviours, will assist you with your credit recovery. Following the steps above can help repair your credit profile and provide the opportunity to be in a better place for future financial opportunities.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
