How Does a Settlement With a Credit Card Company Affect a Credit Report?

A credit card settlement can adversely affect your credit report.

A credit card debt settlement is a reduced amount the consumer can pay to satisfy the debt and cease collection activity. A credit card settlement can, however, negatively affect your credit report.

Effects

A debt settlement to a credit card company can appear on your credit report. The credit card company may report the information to credit bureaus like Experian, Equifax and Trans Union. Settlements adversely affect your credit report by lowering the credit score.

Time Frame

According to the Fair Credit Reporting Act, adverse information such as debt settlements may appear on your credit report for up to seven years. Creditors who see the settlement information may be less inclined to lend to you without greater payment assurance.

Considerations

Rather than settling a debt with a credit card company and negatively affecting your credit, you may consider making installment payments instead. Call your creditor to negotiate an installment plan that will give you more time to pay the debt. This benefits the creditor, too. Although it may take longer, it will receive 100 percent of the debt owed.

References

• Federal Trade Commission: The Fair Credit Reporting Act
• The Money Puzzle: How to Negotiate with Credit Card Companies
• Maps of World Finance: Debt Settlement Effect On Credit Report

Resources

• PRLog: Negotiating With Credit Card Companies -- What You Should Never Do
• Credit Cards: Debt Negotiation in 3 (Not) Easy Steps