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Debt Negotiation and the Importance of Your Credit History

Your credit history is of great importance if you decide to go for debt negotiation. It plays a major role in the outcome of the negotiation.

How credit history affects debt negotiation

Credit history is extremely important as far as any sort of debt negotiation is concerned. If you have an impressive credit history, chances are that you will soon get approval of your loan and receive more benefits. On the contrary, if you have a bad credit history, the loan you receive will come with higher interest rates and less attractive benefits. It will tell potential lenders how creditworthy you are, informing them about your present and past track record. Credit history, therefore, is important when one looks for debt negotiation to get out of a debt trap.

Debt negotiation

In debt negotiation, a company begins negotiation with creditors trying to lower the debt amount of a consumer. It is found that debt negotiation can reduce the debt by up to 50% and make a consumer debt free in one to three years, who makes a significantly lower monthly payment during the period. For a creditor to agree to a debt settlement, a client must default on his/her their payments to the creditors, which, on the other hand, may impact his/her credit history. For those who have quite a large amount of debt, chances are that their credit history has already taken a beating.

Your recent credit history

No company will be interested in entering into a debt negotiation with you if it finds that you have recently spent a big amount on luxury items while defaulting on your payments. The company will consider it as fraudulence on your part and act accordingly. If the company begins to doubt your sincerity, the negotiations on your debt negotiation are not likely to succeed.

Bankruptcy and debt negotiation

Debt negotiation mostly succeeds because creditors consider it a better option than losing all their money if a debtor files for bankruptcy. However, you have little chance in case you have filed Chapter 7 Bankruptcy during the last seven years. In case you have filed for bankruptcy in the past two years, you are then barred from filing again for another five years. That’s why a creditor sometimes tends to lose interest in negotiation. They think it’s useless to reduce the amount if the debtor cannot file bankruptcy in any case. However, creditors might look for a settlement in spite of you filing bankruptcy in the past seven years. Because, they understand it’s difficult to collect the amount if you don't have any assets or enough income. Even a portion of the amount looks attractive for them as it saves them both money and time in running after you.

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