Question from a Quora user: Will a debt settlement fix credit? Is debt settlement a good way for consumers to fix their credit issues?
Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:
The reason for the existence of credit ratings and credit scores is to protect lenders from potentially feckless borrowers who approach them for loans. Therefore, if someone’s credit rating has already been affected by, for example, late or non payment of debts, then a settlement won’t do anything to “fix it”.
The only way to fix a credit report issue is to deal with the outstanding debts by: (1) paying it off; (2) through a settlement; (3) or with the assistance of a Licensed Insolvency Trustee who can assist you with a legal settlement called a consumer proposal. Once you’ve dealt with your debts through one of these options, then you will need to rebuild your credit from scratch.
Rebuilding credit can be initiated by obtaining a secured credit card and using it on a regular basis.