Debt disaster – How can you get out of it quickly?

Problem I have enrolled into a debt settlement program to pay off my credit card debts. I got into debt problems few years back due to some major financial mistakes. My total credit card debt amount is around $45,000. After enrolling into the debt settlement program, I have stopped using plastic cards. I don’t want to incur debt again. I try to pay my bills after receiving my paycheck every month. I am trying my best to relieve my debt burden. A close friend of mine recently told that debt settlement will appear on my credit report. Is it true? If yes, then for how many years. Will I not get any loan in future? Thanks for any information. Solution Yes, it is true that negative items remain on credit reports for 7 to 10 years from the first date of default. For example, if you have defaulted on a credit card on10th May 2004, then it will be appear on your credit report till 10th May, 2011. However, after you have paid off your debt through debt settlement, the account status will be updated on your credit report. It will be either reported as "Paid as Settled" or "Paid in Full" on your credit report. It will be best for you if your creditors update the account status as "Paid in Full" on your credit report.      I am assuming that the debts you are settling are already few years old. So, in such a situation you need not to wait for another 7 years. They will be removed from your credit report within a few years if everything goes well. Normally, debt settlement makes a negative impact on credit score. It may ding your credit score by 125 points also. So, after settling your debts, you should start taking active steps to repair your credit. If required, get help from a reliable credit repair agency in future. Make sure you add some positive information on your credit report on a regular basis.   As far as securing loan in future is concerned, it will depend upon the lenders. Usually, lenders like to give money to the consumers with a clean credit report. However, when they will see that you have at least settled your debts instead of neglecting them, they may agree to accept your loan application. I think you have stopped using credit cards in fear of getting into debt problems again. However, if you pay all your bills through cash or debit cards, then it will not help you repair your credit simply because these transactions won't be reported on your credit report. This is why, you may use a secured credit card with low credit limit to restrict you from spending more than what you should do. Use a secured credit card which is reported to the credit bureaus. This will enable you add some positive information to your report. Finally, always make sure you pay all bills on time. When you make payments on your loans as per the agreements, positive information will be added on your report. This will help you get loans and lines of credit at reasonable terms and conditions.