Chat with us, powered by LiveChat

Managing Your Credit Wisely After Debt Settlement

Hey there! If you’re reading this, chances are you’ve recently gone through debt settlement and are wondering how to manage your credit wisely moving forward. First off – congrats on getting through debt settlement! I know it can be a difficult process, but you took a big step towards financial freedom. Now it’s time to start rebuilding your credit.

I want to walk you through some practical tips and info to empower you to use credit responsibly going forward. Credit can be confusing, but it doesn’t have to be! Let’s break it down together.

- -

How Debt Settlement Impacts Your Credit

When you settle a debt for less than the full amount owed, it will likely show up on your credit report as “settled for less than agreed.” This signals to future lenders that you were unable to pay back the full amount as originally agreed upon.

Settling an account is better than defaulting and not paying at all, but it will still hurt your credit score in the short-term. Here are some key things to know:

  • Your credit score will drop after debt settlement. Expect it to drop anywhere from 50-100 points initially.
  • Settled accounts stay on your credit report for 7 years. The impact lessens over time, but will affect your score for several years.
  • Having a thin credit file (not much history) or poor score before debt settlement means it may take longer to rebuild – up to 2 years.

The good news? If you use credit responsibly moving forward, your score will recover over time. Let’s look at how.

Tips for Managing Credit Wisely After Settlement

1. Allow time for your credit to recover

Be patient with yourself – credit recovery takes time. Focus on establishing good financial habits and your score will slowly improve. Expect it to take 6-24 months to see noticeable differences. During this time, only apply for credit if absolutely necessary so new inquiries don’t further damage your score.

- -

2. Make payments on time

Set up autopay or calendar reminders to ensure you never miss payments. Payment history makes up a significant portion of your credit score. Even one late payment can negatively impact your score. Aim to make at least 12 consecutive on-time payments.

3. Keep credit card balances low

Ideally, keep balances below 30% of your credit limit. High balances can negatively impact your credit utilization ratio (the percentage of your total credit limit that you’re using). Try to pay off balances in full each month if possible.

4. Limit new credit applications

Each credit application causes a hard inquiry on your report, which can lower your score, especially if you have limited credit history. Avoid applying for multiple new credit lines in a short period of time.

5. Monitor your credit report

Review your credit report from all three bureaus (Experian, Equifax, TransUnion) to ensure no errors or fraudulent activity. You can access free reports annually at AnnualCreditReport.com. Dispute any errors you find!

6. Consider secured credit cards

Secured cards require an upfront security deposit and are easier to qualify for after debt settlement. They can help build positive payment history. Just be sure to avoid high fees.

- -

7. Don’t close old accounts

Keep old credit card accounts open, even if you don’t use them. The average age of your credit history also factors into your score. Closing old accounts lowers the average age.

8. Sign up for credit monitoring

Credit monitoring services like Credit Karma provide free access to credit scores and reports. They also alert you of any big changes or suspicious activity.

Avoiding Credit Pitfalls After Settlement

While rebuilding credit, beware of these common traps that can lead you back into debt:

- -
  • Relying on creditors to set your credit limits – Lenders allow higher limits to earn more interest. Set your own limits.
  • Paying only minimums – Pay more than minimums to pay off balances faster and save on interest.
  • Opening too many new accounts – Space out applications by 6 months to avoid excessive hard inquiries.
  • Using convenience checks – They’re essentially high-interest cash advances. Shred any you receive.
  • Accepting credit limit increases – Higher limits can tempt overspending. Only accept if you have self-control.

Give It Time

Rebuilding credit takes patience, but you’ve already done the hard work by completing debt settlement. Now it’s just a matter of letting your score recover and using credit responsibly moving forward. Monitor your progress, celebrate small wins, and don’t get discouraged if it takes a full two years to see significant improvement.

You’ve got this! Wishing you all the best.

-[Your Name]

Helpful Resources

 

Get Debt Relief Today

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

"Super fast, and super courteous, Delancey Street is amazing"
Leo
$500,000 MCA Restructured Over 3 Years
"Thanks for helping me in literally 24 hours"
Jason
$250,000 SBA Loan Offer in Compromise
"Great choice for business owners who need a trustworthy partner"
Mary
$350,000 MCA Restructured Over 2 Years

In The Media

Delancey Street CEO discusses ways to reward employees
Delancey Street CEO discusses the benefits of franchising on Forbes.
Delancey Street CEO discusses management on AMEX.
Georgia Business Debt Settlement

Georgia Business Debt Settlement: Navigating Financial Relief with Expertise Navigating…

Florida Car Debt Relief Lawyers

Florida Car Debt Relief Lawyers: Navigating Your Path to Financial…

Florida Debt Consolidation

Florida Debt Consolidation: A Comprehensive Guide to Finding Relief Introduction…

Florida Student Debt Relief Lawyers

Florida Student Debt Relief Lawyers: Your Ultimate Guide Navigating the…

Florida Medical Debt relief Lawyers

Florida Medical Debt Relief Lawyers: A Comprehensive Guide Navigating the…

Delancey Street simply gets it. You're talking to experts.
Steven Norris
Get Help Today

Ready To Get Started?

If you have questions, feel free to shoot us an email, or fill out our live chat.

Schedule Consultation