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Does credit card debt forgiveness hurt your credit score?

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Credit card debt forgiveness can impact your credit score, but that may not be the case for every cardholder.

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With persistent (but cooling) inflation driving up the cost of consumer goods, high interest rates increasing the cost of borrowing and a softening job market making it tougher to find employment, a significant amount of pressure has been weighing on household budgets. As a result, more people are using their credit cards to help make ends meet, leading credit card debt to hit a record-breaking $1.14 trillion nationwide.

While credit cards can provide short-term financial flexibility, they come with a significant risk: elevated interest rates. With average credit card rates hovering near 23% currently, unpaid balances can snowball rapidly, trapping borrowers in a cycle of mounting debt. For those struggling to keep up with payments, credit card debt forgiveness, also known as debt settlement, may seem like an attractive solution. 

With credit card debt forgiveness, the goal is to have your creditors accept a lump-sum settlement that’s lower than your current balance, reducing the total amount you owe. When negotiations are successful, it’s possible to have your credit card debt reduced by 30% to 50% or more — providing significant relief from your high balances. Before pursuing this option, though, it’s important to understand how it could impact your credit score.

Learn how credit card debt forgiveness could help you now.

Does credit card debt forgiveness hurt your credit score?

The short answer is yes, credit card debt forgiveness can negatively affect your credit score. However, the impact depends on various factors, including your current credit score and the specifics of your debt settlement agreement.

When you engage in debt settlement, you typically work with a debt relief company that negotiates with your creditors to accept less than the full amount owed. This process often involves several steps that can harm your credit:

  • Stopping payments: Most debt relief companies advise you to stop making payments to your creditors and instead save that money for potential settlements. This strategy can lead to missed payments being reported to credit bureaus, which can significantly damage your credit score.
  • Account status changes: As you fall behind on payments, your accounts may be marked as delinquent or sent to collections, further lowering your credit score.
  • Settlement reporting: Once a settlement is reached, the creditor will typically report the account as “settled for less than the full balance” on your credit report. This notation can negatively impact your credit score and remain on your report for up to seven years.
  • Closing accounts: Settled accounts are usually closed, which can reduce your available credit and potentially increase your credit utilization ratio, which can then lower your score.

The magnitude of the impact on your credit score can vary, however. For example, if you currently have a high credit score, you may see a more dramatic drop, as the negative items will contrast sharply with your previously positive credit history. On the other hand, if your credit is already damaged due to late payments, high credit utilization or other factors, the additional impact of debt settlement may be less severe.

It’s worth noting that while debt settlement can hurt your credit score in the short term, it may still be a better option than continuing to struggle with unmanageable debt or filing for bankruptcy. Over time, as you rebuild your credit, your score can recover

Don’t let your credit card debt continue to grow. Find out how the right debt relief company could help now.

How to decide if credit card debt settlement is right for you

Deciding whether to pursue credit card debt settlement requires careful consideration of your financial situation and long-term goals. Here are some factors to weigh:

  • Debt amount: Debt settlement is typically most beneficial for those with significant credit card debt, usually $10,000 or more. If your debt is lower, other options like a debt management plan, debt consolidation or a balance transfer might be more appropriate.
  • Ability to pay: Consider whether you have the means to make meaningful progress on your debt through regular payments. If not, debt settlement could provide relief and help you avoid bankruptcy.
  • Credit score implications: If maintaining a high credit score is crucial for your near-term plans, debt settlement may not be the best choice. However, if you’re willing to accept a temporary hit to your credit for long-term financial stability, it could be worth considering.
  • Tax consequences: Be aware that forgiven debt may be treated as taxable income by the IRS, so it could mean paying more in taxes.
  • Time frame: Debt settlement programs typically take two to four years to complete. Consider whether you’re willing and able to commit to this process.

The bottom line

While credit card debt forgiveness can offer a path out of overwhelming debt, it’s not without its drawbacks. The impact on your credit score can be significant, potentially affecting your ability to obtain credit, secure favorable interest rates or even rent a home in the near future. For those drowning in high-interest credit card debt with no clear way out, though, the long-term benefits of debt settlement may outweigh the temporary credit score damage. 



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LaMonica McIver wins special House election in New Jersey for late Donald Payne Jr.’s seat

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LaMonica McIver wins special House Democratic primary in N.J.


LaMonica McIver wins special House Democratic primary in N.J.

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TRENTON, N.J. Democratic Newark City Council President LaMonica McIver has defeated Republican small businessman Carmen Bucco in a contest in New Jersey’s 10th Congressional District that opened up because of the death of Rep. Donald Payne Jr. in April.

McIver will serve out the remainder of Payne’s term, which ends in January. She and Bucco will face a rematch on the November ballot for the full term.

McIver said in a statement Wednesday that she stands on the “shoulders of giants,” naming Payne as chief among them.

She cast ahead to the November election, saying the right to make reproductive health choices was on the ballot as well as whether the economy should benefit the wealthy or “hard working Americans.”

“I will fight because the purpose of politics and the purpose of our vote is to give the people of our communities and our nation a bold voice,” she said.

Bucco congratulated McIver on the victory in a statement but said he’s looking forward to the rematch in November.

“I am not going anywhere,” he said in an email. “We still have a second chance to make district 10 great again!”

Who are LaMonica McIver and Carmen Bucco?

McIver emerged as the Democratic candidate in a crowded field in the July special election. A member of the city council of New Jersey’s biggest city since 2018, she also worked for Montclair Public Schools as a personnel director and plans to focus on affordability, infrastructure, abortion rights and “protecting our democracy,” she told The Associated Press earlier this summer.

Bucco describes himself on his campaign website as a small-business owner influenced by his upbringing in the foster system. He lists support for law enforcement and ending corruption as top issues.

The 10th District lies in a heavily Democratic and majority-Black region of northern New Jersey. Republicans are outnumbered by more than 6 to 1.

It’s been a volatile year for Democrats in New Jersey, where the party dominates state government and the congressional delegation.

Among the developments were the conviction on federal bribery charges of U.S. Sen. Bob Menendez, who has denied the charges, and the demise of the so-called county party line — a system in which local political leaders give their preferred candidates favorable position on the primary ballot.

Democratic Rep. Andy Kim, who’s running for Menendez’s seat, and other Democrats brought a federal lawsuit challenging the practice as part of his campaign to oust Menendez, who has resigned since his conviction.



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Body found near Kentucky shooting site believed to be suspect, officials say

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Body found near Kentucky shooting site believed to be suspect, officials say – CBS News


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In a news conference Thursday night, Kentucky police said they believe a body found near the site of the Interstate 75 shooting on Sept. 7, 2024, is that of suspect Joseph Couch. Officials said articles on the body indicated it was likely Couch, but that crews were still processing the scene and wouldn’t have final identification until later. CBS News’ Carissa Lawson anchors a special report.

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Sean “Diddy” Combs at same Brooklyn detention center that held R. Kelly, Sam Bankman-Fried, other high-profile inmates

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A second judge refused to grant bail to Sean “Diddy” Combs on Wednesday and he could remain in federal custody at a Brooklyn detention center until his trial for sex trafficking charges. Combs joins other high-profile inmates, such as singer R. Kelly, fallen cryptocurrency mogul Sam Bankman-Fried, rapper Ja Rule —even Al Sharpton served a brief stint— who were held at the same federal detention center.

Notorious for its horrible conditions —inmates won a $10 million class action settlement after enduring frigid conditions during an 8-day blackout in 2019— the waterfront industrial complex, MDC Brooklyn, houses 1,200 inmates. 

US-BRITAIN-CRIME-JUSTICE-EPSTEIN-MAXWELL
The Metropolitan Detention Center in Brooklyn is a federal administrative detention facility. 

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Violence and corruption have long plagued the facility; U.S. District Judge Gary R. Brown of the Eastern District of New York wrote the detention center had  “dangerous, barbaric conditions” in a recent sentencing opinion. Two inmates were stabbed to death in recent months and several correction officers have been convicted for smuggling contraband and accepting bribes.

Combs joins a list of high-profile personalities that have landed at the MDC Brooklyn, partly because the city’s other federal detention center, MDC New York, closed in 2021, also due to horrible conditions. The disgraced financier Jeffrey Epstein died by suicide in his cell there in 2019. “Numerous and serious” instances of misconduct among corrections staff gave Epstein the opportunity to kill himself, a subsequent federal watchdog investigation found.

Kelly sued the federal detention center in 2022 for wrongly putting him on suicide watch after his sentencing. Kelly sought $100 million because he said the detention center knew he wasn’t suicidal after he was convicted in 2021 for racketeering and violating the Mann Act, which bars transporting people across state lines for prostitution.

FTX Founder Sam Bankman-Fried Attends Court
Sam Bankman-Fried, co-founder of FTX Cryptocurrency Derivatives Exchange, leaving court in New York on July 26, 2023. 

Yuki Iwamura/Bloomberg via Getty Images


Former crypto billionaire Bankman-Fried survived on bread, water and sometimes peanut butter when he was in the MDC Brooklyn, his attorney said, because the detention center continued to serve him a “flesh diet” despite requests for vegan dishes.

Ja Rule stayed at the MDC Brooklyn for a brief time before being released after serving most of his two-year sentence for illegal gun possession. Most of his prison time was spent in a state prison in New York. 

Sharpton served a 90-day sentence in 2001 and went on a hunger strike for protesting the U.S. Navy bombing of the island of Vieques, in Puerto Rico.

Combs was taken into custody on Monday and according to an indictment unsealed Tuesday he was charged with sex trafficking, racketeering conspiracy and transportation to engage in prostitution. 

His attorney Marc Agnifilo told CBS News, “It’s impossible to prepare for a trial from where he is,” after a first federal judge denied Combs bail on Tuesday.

U.S. Magistrate Judge Robyn Tarnofsky agreed with prosecutors who argued the hip-hop mogul, who is accused of using his business empire as a criminal enterprise to conceal his alleged abuse of women, is a flight risk and poses an ongoing threat to the safety of the community. 

Agnifilo said the part of the detention center where Combs is being held is “a very difficult place to be.” 

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