Definition
A debt account is satisfied when payments are no longer due and the account is closed.
Analysis
There may be multiple methods for satisfying a debt. Each one has a different impact on credit scoring.
The best way to satisfy a debt is to repay the entire amount without any late or skipped payments. The debt will be satisfied and will appear on a credit report as a positive account for 10 years.
Sometimes a consolidation loan can be used to pay off existing debts. This will similarly satisfy those debts, although it creates a new liability. It also is dependent on a good credit score.
A debt management program can help a debtor satisfy accounts by making somewhat smaller payments and at lower interest rates. While a credit score may drop initially when accounts are closed, it tends to increase each month until the debt is repaid in full. In the end, the debt is satisfied, and the debt could be listed as a positive account as long as no late payments were made before the program began or during the transition to the program.
Debt settlement can lead to a satisfied account, but with a high risk of legal action. Putting off a debt settlement until enough funds can be amassed to settle on a debt can increase the chance that the creditor will pursue a judgment. Once a debt is settled, the debt is satisfied and is listed on a credit report as settled for less than the amount owed. It will remain as a negative account for credit scoring purposes for 7 years.
