Credit Union Official Warns Against Debt Settlement Companies
An Executive Vice President with First Education Federal Credit Union in Cheyenne is warning people about the dangers of Debt Settlement Companies and the effect they can have on your credit score.
Ann Lucas says that while the offers to settle your debt for 50 or 60 percent of what you owe may sound good, such agreements can severely damage your credit score. Lucas says even though the creditor may agree to “forgive” a portion of your debt, one problem is the creditor is receiving significantly less than the amount of money owed, which she says is a hardship.
Lucas says another problem is that before a company will even consider such a debt settlement, usually a payment will not have been made for several months. Lucas says even a 30 day late payment is bad for your credit score. She says more typically in a debt settlement agreement, a payment will not have been made for six months or so.
She says such a late payment is “disastrous” for someone with a credit score of 700 or better, causing them to lose as much as 100 points on the score. Lucas says that while the damage is less dramatic to someone starting out with a low credit score, even in that case the person may lose 50 points or more on their–certainly not the way to improve poor credit.