How to Handle Debt and Improve Credit

You don't have to handle debt on your own. SoloSettle can help.

Summary: Anyone can reduce their overall debt by following healthy spending habits like paying bills on time and keeping low balances and debts relative to income levels. Debt consolidation and installment loans are good options for reducing debt repayments. Debt settlement is also a great way to eliminate debt and give yourself a financial reset. SoloSettle can help you settle your debts once and for all.

Debt is a reality of life, but it doesn't have to be a burden. With the right strategies and financial planning, even those with significant debt can improve their credit score and pay down their debts over time.

This article will explore what a credit score is, how to maintain good credit health and the advantages of debt consolidation loans, installment loans, and debt settlement.

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What is a credit score?

A credit score is a number lenders use to assess an individual’s ability to repay debts. It considers factors such as payment history and credit utilization ratio (the amount of available credit used). Generally, the higher the score, the better one's creditworthiness; scores range from 300-850, with higher scores indicating more reliable borrowers.

Generally, a good credit score is typically considered to be a score above 670 on the FICO credit scoring system. However, what is considered a good credit score may vary depending on the lender or credit bureau, and the specific credit product you are applying for.

Having a good credit score is important because it can make it easier for you to get approved for credit products such as loans, credit cards, and mortgages, and may also result in more favorable interest rates and terms. A good credit score typically indicates to lenders that you are a responsible borrower who is likely to pay back loans on time and in full.

How is credit score calculated?

Credit scores are typically calculated by a credit scoring model, which uses various factors to calculate a score that represents your creditworthiness. The most commonly used credit scoring model is the FICO scoring system, which takes into account the following factors:

Payment history: This is the most important factor in determining your credit score, and it takes into account whether you have paid your bills on time in the past.

Amounts owed: This factor looks at the total amount of debt you have, as well as the amount you owe on specific credit accounts.

Length of credit history: This factor looks at how long you have had credit accounts open, and how recently you have used them.

Credit mix: This factor looks at the different types of credit accounts you have, such as credit cards, loans, and mortgages.

New credit: This factor looks at how many new credit accounts you have opened recently, and how often you have applied for credit.

Once the credit scoring model has taken all of these factors into account, it generates a credit score that ranges from 300 to 850 (in the case of the FICO score). The higher the score, the more likely you’ll be approved for new lines of credit or loans.

With this in mind, let’s explore ways you can improve and maintain a good credit score.

Maintain good credit health

Building good credit takes time and discipline. To get started on improving your credit score, follow these tips:

Pay bills on time: Establishing consistent payment habits will help build your score quickly. Make sure you pay all your bills on time or early if possible.

Reduce your debt: Paying off debts as quickly as possible will help improve your overall debt-to-income ratio and establish yourself as a responsible borrower in the eyes of lenders. If you can’t pay off the full balance right away, start by making payments that are larger than the minimum due each month until you can pay it off completely.

Keep low balances: Keeping low balances on your accounts shows lenders that you won't overextend yourself financially. So try to keep all balances below 30% of their limit at any given time to maximize your score.

Don't close old unused accounts: Closing old accounts may seem like an easy way to reduce balances, but this could hurt your score in some cases since closing an account reduces available credit, negatively affecting debt-to-income ratios. Instead, try paying down those balances slowly over time while maintaining other healthier spending habits mentioned above towards those with active accounts.

Debt consolidation and installment loans can help you repay debt

Debt consolidation loans allow individuals with multiple debts to consolidate them into one loan with lower interest rates & more manageable monthly payments based on one's current financial situation & budget needs. This works by rolling multiple existing debts into one new loan with a longer term length so that monthly payments are more affordable or easier to make in some cases (based on the budget).

Additionally, opting for easy installment loans for debt repayment can also provide relief from high-interest rates associated with many traditional forms of financing like payday or title loans. These tend to carry extremely high-interest rates & fees that can prevent borrowers from ever paying off their debts in full, if not managed properly over time.

Debt settlement can help eliminate debt

Debt settlement is a process where a debtor negotiates with their creditors to pay off their debt for a reduced amount. The idea behind debt settlement is that creditors may be willing to accept a lump sum payment for less than the full amount owed, in order to get at least some of their money back and avoid the cost and hassle of pursuing further collection efforts.

Once a debtor has saved up enough money, they can approach their creditors and offer a lump sum settlement in exchange for a release of their remaining debt. If the creditor agrees to the settlement, the debtor would pay the agreed-upon amount and the debt would be considered paid in full, even if it was for less than the original amount owed.

To settle your debt, follow these steps:

Respond to pending lawsuits. If you’ve been sued for a debt, you can reach out to settle it at any stage of the process. But first, you should respond to avoid a judgment. To respond, draft and file a written Answer into the court case.

Send a settlement offer to start negotiations. There is a good chance your creditor will accept a settlement offer for less than the original amount you owe. As such, start with a low offer to give yourself room to negotiate.

Get the settlement agreement in writing. As soon as you reach an agreement with your creditor, get it in writing. This will protect you from any legal issues moving forward and ensure that you aren’t held responsible for the debt after you pay the settlement.

SoloSettle can help with all these steps and more. As a tech-based approach to debt settlement, SoloSettle helps consumers settle debts on their own. Our software sends and receives offers until an agreement is reached.

Check out this video to learn more about the three steps to debt settlement and how SoloSettle can help:

It's important to note that debt settlement is not a guaranteed solution for eliminating debt, and it can come with risks and drawbacks. For example, there is no guarantee that creditors will agree to a debt settlement, and debt settlement can result in a temporary drop in the debtor's credit score. Additionally, debt settlement can come with fees and taxes, and may not be the best solution for all types of debt or for all financial situations.

If you are considering debt settlement, it's important to do your research and understand the potential risks and benefits, and to consider consulting with a financial professional or credit counselor for guidance.

Now, let's take a look at how to settle a debt.

Example: Robert is behind on his bills. He’s stopped paying off his Discover card, and after several months, Discover decides to pursue a lawsuit against him. When Robert receives the Summons and Complaint in the mail, he uses SoloSuit to respond with an Answer before the deadline. This gives Robert time to make a settlement plan. Next, he uses SoloSettle to send a settlement offer to Discover. Since he owes $1,000, Robert sends an initial offer of $500. Discover considers Bob’s offer and decides to counter with $700. After a few rounds of negotiations, they reach a settlement at $600. After preparing and signing a settlement agreement, SoloSettle transfers Robert's money to Discover, keeping his financial information private and secure. Discover drops the case against Bob, and he is finally off the hook.

Conclusion

Ultimately, handling debt and improving one's credit does take some effort. Still, it’s worth it in order to have access to lower interest rates & better terms when seeking additional financing in the future. Anyone can reduce their overall debt by following healthy spending habits like paying bills on time and keeping low balances and debts relative to income levels.

Consolidation loans, installment loans, and debt settlement are good options for reducing debt repayments. As the amount of debt is lessened in this way, you can improve your financial health over time. Moreover, you can build a secure future by investing in safe and reliable assets that provide long-term returns.

What is Solo?

Solo makes it easy to resolve debt with debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt. SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

SoloSettle can help you contact your debt collector or creditor and negotiate the debt to settle for less, all online. It simplifies and streamlines the process to settling your debt.

No matter where you find yourself in the debt collection process, Solo is here to help you resolve your debt.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

How to Answer a Summons for debt collection in all 50 states

Here's a list of guides on how to respond to a debt collection lawsuit in each state:

The Ultimate 50 State Guide

Debt collector guides

Are you being contacted by a debt collector? We’re making guides on how to resolve debt with each one.

Arbitration

If the thought of going to court stresses you out, you’re not alone. Many Americans who are sued for credit card debt utilize a Motion to Compel Arbitration to push their case out of court and into arbitration.

Below are some resources on how to use an arbitration clause to your advantage and win a debt lawsuit.

Bankruptcy

Bankruptcy is a great way to legally resolve debt, but it's usually best to consider it as a last resort. Here are some bankruptcy guides to help you decide which debt resolution option is best for you.

Check your case status

Don’t have time to go to your local courthouse to check the status of your case? We’ve created state guides on how to check the status of your case throughout the US, complete with online search tools and court directories.

Credit

Debt has a big impact on your credit. Below is a list of guides on how to repair and improve your credit, even while managing major debt, along with other credit-related resources.

Debt collection FAQs

Find answers to some of our the most commonly-asked questions about debt collection below.

Debt collection documents and templates

If you're dealing with debt, these documents and templates will help you respond, protect your rights, negotiate, and resolve your debts.

Debt relief

We’ve created a specialized guide on how to find debt relief in all 50 states, complete with steps to take to find relief, state-specific resources, and more.

Debt settlement

Debt settlement is one of the most effective ways to resolve a debt and save money. We’ve created state guides on debt settlement. Find out how to settle in your state with a simple click and explore other debt settlement resources below.

Eviction

Facing an eviction? The following guides will help you navigate your situation with confidence.

Federal debt collection laws

Knowing your rights makes it easier to stand up for your rights. Below, we’ve compiled all our articles on federal debt collection laws that protect you from unfair practices.

Legal aid

Helping people find access to justice is at the heart of Solo's misison. If you're dealing with a legal debt issue, the following guides will help you through it.

Medical debt

Having a health challenge is stressful, but dealing with medical debt on top of it is overwhelming. Here are some resources on how to manage medical debt.

Personal finance

Learn how to manage your finances and overcome crushing debt. Check out our personal finance guides below.

State debt collection laws

Debt collection laws vary by state, so we have compiled a guide to each state’s debt collection laws to make it easier for you to stand up for your rights—no matter where you live.

Statute of limitations on debt

Like all debt collection laws, the statute of limitations on debt varies by state. So, we wrote guides on each state’s statutes and more.

Stop collection calls

Do you keep getting calls from an unknown number, only to realize that it’s a debt collector on the other line? If you’ve been called by any of the following numbers, chances are you have collectors coming after you, and we’ll tell you how to stop them.

Wage garnishment

Forgot to respond to your debt lawsuit? The judge may have ordered a default judgment against you, and with a default judgment, debt collectors can garnish your wages. Here are our guides on how to stop wage garnishment in your state, plus other wage garnishment resources.

The Debt Hotline

Hosted by Team Solo, The Debt Hotline breaks down debt and personal finance topics with help from attorneys, financial experts, and industry pros. We respond to real questions to help you navigate debt with knowledge and courage.

Other debt resources

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And 50% of our customers' cases have been dismissed in the past.

"Finding yourself on the wrong side of the law unexpectedly is kinda scary. I started researching on YouTube and found SoloSuit's channel. The videos were so helpful, easy to understand and encouraging. When I reached out to SoloSuit they were on it. Very professional, impeccably prompt. Thanks for the service!" - Heather

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