How Quickly Do Settled Debts Get Taken Off My Credit Score?

Settling credit card debts may not instantly improve your credit score.

Negative credit information, including settled debts, can be reported on your credit report and affect your credit score for a minimum of seven years, according to the Fair Credit Reporting Act.

Misconceptions

You credit score and credit report are two different things. Your credit score is a three-digit number creditors use to predict your credit worthiness. Debts aren't listed on your credit score. However, they are listed on your credit report. A credit report is a collection of private and public data about your credit activity. Your credit score is determined by the information on your credit report.

Identification

Settling a debt allows you to resolve a delinquent account by paying less than the full amount owed. Creditors often will agree to settle after you have stopped making payments for several months. After you settle, the creditor will update your credit report to show that the account was "settled for less than the full balance," according to Black Enterprise magazine.

Effects

Settling debts can end calls from certain bill collectors and allow you to put the issue behind you. Microsoft Money says settling can hurt your score initially as it suggests to creditors that you are unwilling to pay your accounts as agreed. However, the site says the damage to your score lessens over time, as creditors focus most on your credit history over the past 12 to 24 months.

References

• Microsoft Money: When Paying Bills Can Hurt Your Credit
• Black Enterprise: Settling Credit Card Debt