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Loans & Debt

How to settle debt without wrecking your credit

Learn when settlement makes sense, how to negotiate, tax traps to avoid, and how to start rebuilding your credit right after.

When it fits

You're 90–180+ days behind and can't catch up; lump sum available.

Steps

  1. Save a realistic lump sum (40–60% is common, varies widely).
  2. Ask for "settled in full" and 1099-C expectations in writing.
  3. Pay via traceable method; never give full bank access.
  4. Monitor credit; dispute any inaccurate reporting.
  5. Start rebuilding (secured card, on-time utilities, low utilization).

Pitfalls

  • Paying a "settlement company" high fees to do what you can do yourself.
  • Ignoring tax on forgiven amounts (may apply).

Frequently Asked Questions

How long will it hurt my credit?

Negative marks can linger up to 6–7 years; impact lessens over time with positive behavior.

Can I get a mortgage later?

Yes—after re-establishing solid credit/payment history.

Plan Your Settlement

Use our Settlement Planner to model offers and credit impact.