Credit Card Debt Essay

Introduction
When it comes to credit card debt, one of the last things you want is a settlement or charge-off on your record, as it will show as a negative item on your credit report. Either one means that you’ve been seriously delinquent in paying your debts. While you can take some steps to minimize the damage, both settlements and charge-off accounts will affect your credit score.

What Is a Settlement or Charge-Off?
When you settle a debt, it means you don’t pay back the full amount you owe. A creditor will usually only accept a settlement if it appears that you can’t afford to pay back the total debt. This generally occurs when you have missed at least a few payments and if it appears that you don’t have the ability to pay off your debt. Rather than end up with nothing, a creditor may agree to a settlement. When you settle an account, it means that the
Both settlements and charge-offs are bad for your credit report. In both cases, the delinquent account stays on your credit report for seven years, even if you ultimately pay off the accounts in full. The reason for this is that your past behavior is considered a predictor of your future behavior. If you get an account charged off and later settle it for less than you owe, both notations will show on your credit report.
What Is the Consequence of Negotiating a Settlement or Charge-Off?
The negative impact on your credit score due to settlements and charge-offs begins will eventually lessen. However, any creditor that looks at your credit report will still see these notations for the full seven years. Any time you apply for a car loan, a home mortgage, or a new credit card, your creditor is likely to take your past actions into account. Depending on the creditor, this could result in a denied application. If you manage to get a loan, you may have to pay a higher interest rate to compensate the creditor for the extra risk involved in granting you