Is Credit Card Settlement Hurting Your Credit Score?

Credit Card Settlement: This refers to an arrangement with your card issuer to resolve outstanding debt by paying a reduced amount. Often pursued when managing monthly payments becomes difficult due to unexpected financial hardships or poor spending habits, credit card settlements can seem like a temporary solution but generally have negative implications on your credit score.

Impact on Credit Rating: Engaging in a credit card settlement can vastly reduce your credit score, comparable to declaring bankruptcy. Such a negative notation can linger on your credit report for up to seven years, affecting your ability to secure credit in the future.

Settlement Process: Starting a settlement involves contacting your card issuer or a debt settlement firm. You'll need to articulate your financial struggles, typically through a credit card settlement letter, and negotiate the terms. Common proposals include lump sum payments. If an agreement is reached, terms might involve income-adjusted repayment plans or temporary relief options.

Is it Advisable? Due to the impact on your credit report, credit card settlements are usually not recommended. If unavoidable, successful negotiation is crucial, and ideally, one should steer clear of the lofty fees charged by settlement firms. Practicing prudent credit card usage and timely payments is crucial. For instance, credit cards like Bajaj Finserv RBL Bank SuperCard offer flexible payment options and rewards, aiding in savings up to Rs. 55,000 annually. New applicants can apply online for swift approval.

Always consider consulting a financial advisor before proceeding with settlement to ensure it's imperative for your situation.