The great news is as long as the credit provider has not already listed a default then negotiating your debts will not affect your credit file. Negotiate my debts today!

Many people are worried that if they attempt to reduce and settle their debts the credit provider may latter record the event on their credit file. The truth is a credit provider is not able to agree to settle a debt and then latter record a default.

Even if the credit provider has started recovery action they will typically put this on hold while negotiations are in place for the settlement of the debt.     

Once the debt has been settled the matter is then finalised.  The only record of this would be held with the credit provider in question.  Let’s say the debt being negotiated is with the CBA, once the debt has been negotiated and settled (often referred to as a “settle for less” offer) the only record of this event would be held with the credit provider in question, in this case the CBA.

This could mean that if this person then latter approached the CBA and applied for credit they may experience some resistance as their internal records would have recorded the fact this debt was behind and latter settled. The good news is no other credit provider would be aware of this so this person would be free to apply for finance with whomever they wanted to with the confidence of knowing they would have no knowledge of past events.

Recently we helped a client reduce and settle twelve different accounts that were in arrears.  Prior to our involvement all twelve credit providers were in the process of commencing recovery action. Once the debt negotiations commenced the credit providers stopped their recovery action while the matter was being reviewed.   In this particular case we saved our client over $40,000.00 and no negative credit listings were recorded on their credit file.

The key is of course to address the situation prior to the credit provider listing a default as once a default has been recorded it can be difficult to have it removed. There are companies that specialise in repairing credit files however prevention is always better than cure.   

A debt can still be negotiated and settled after a default has been recorded however the settlement of the debt will not in itself remove the default listing, the credit provider will however be required to update the status of the default listing to show it has been settled, this in itself is a positive thing.

Effective debt negotiation is often about timing and the fact an account is in arrears can actually be a positive point when reducing a debt.  Having said this it is best if a payment default has not been recorded at the time the negotiation commences as this means the persons credit file will be unaffected.