How Does a Settlement Reflect on Your Credit?

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A settlement from an outstanding debt can reflect poorly on your credit for the immediate future, but it could be a wise long-term move. Weigh the pros and cons of working out a debt settlement with information from a portfolio manager in this free video on finance.

Part of the Video Series: Credits, Stocks & Pension
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Video Transcript

Do you have large credit card debts or other debt outstanding? Hi, this is Roger Groh of Groh Asset Management. Has your bank or other firm approached you about working out that debt with the company that you've borrowed money from? Well, the issue there is if you do go into a settlement with the company that you've borrowed money from, probably from a credit card company is where it happens most frequently, what happens to your credit? Well, certainly, that's going to be reflected on there, and any future lender is going to be aware that whoever lent you money in the past did not get all of their money back. It cannot be a helpful thing. On the other hand, what it does do is to give you a way out of your mess and it might be worth the short-term pain of not being able to borrow money at cheap rates for a while -- let's say, five years or ten years in some situations -- than it is to go on and on and on and never really solve the issue. So what does it do? It's going to hurt your credit score in the short term. It might very well be beneficial long term. You need to talk to your lawyer and accountant about the pros and cons of both. Write down the full accounting numbers of it, then figure out the best way to go. I hope that helps. I'm Roger Groh of Groh Asset, and thank you for spending time with me.


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