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Structured Settlements: How They May be the Right Choice for Avoiding a Bad Credit Rating

Whether you already have a structured settlement or you are deciding between a structured settlement payment arrangement and a lump sum payout, your credit rating is a significant factor to be considered. Good credit is important. Access to credit and loans can impact a great many of life’s necessities:

  • Place to live – whether renting or buying, credit checks are a given.
  • Reliable vehicle – a good credit rating is required to lease or finance.
  • Higher education – student loans for you and/or your kids may be the only option to pay for college or vocational school.
  • Employment – background checks that include a look at your credit are becoming an increasingly common requirement for many positions.
  • Utilities and cell phones – good credit is a necessity for most cell phone contracts and may also allow you to avoid paying a utility deposit.
  • Insurance – eligibility and insurance rates are often impacted by a score attributed to you based upon many factors, including your credit rating.
  • Business loans – banks want evidence that you are a good risk before they will extend you credit.

Your credit score also determines what type of terms you will receive when applying for credit and the amount for which you can qualify. Suffice it to say, achieving a good credit rating is a worthwhile goal.

So, what does a structured settlement have to do with avoiding a bad credit rating? Well, one of the constants in the factors that affect your credit rating is the determination that you are financially responsible. Receiving reliable, consistent payments over a long period of time makes this an attainable goal.

Paying Bills on Time

Late payments reported on your credit report will send your rating in a nose dive. Receiving structured settlement payments helps you set a realistic and sustainable budget. Living on a budget has the benefit of ensuring that you will have enough money coming in to cover what needs to go out. This means you can pay your basic household bills, such as rent, utilities, internet and phone, on time every month. 

Spending within your Means&Keeping Low Balances

Creditors look for wise, responsible spending habits. Maxing out credit cards and carrying high balances are a definite don’t do when trying to avoid a bad credit rating. Unfortunately, a lump sum payment usually encourages the very spending habits you wish to avoid. But with structured payment arrangements, you can budget for what you need and make payments every month to keep your balances low or even non-existent.

Qualifying for Different Types of Credit

A little variety in the type of credit you have is a positive for your rating. Your steady income through structured payments makes you a better risk for lenders which increases your odds of qualifying for a variety of credit, such as student loans, installment loans, a line of credit and car financing, as well as credit cards.

When Selling Payments May Help your Credit

These are all tips for avoiding a bad credit rating. But what if you already have bad credit? Applying these practices over the long term will certainly help you improve your rating, but in extreme cases, it may be beneficial to sell some of your structured settlement payments in order to pay down debt, negotiate debt settlement arrangements with a collection agency and avoid costly fees, penalties and interest rates. It is a smart choice many of the times to sell structured settlements in urgent financial crisis.

So, despite the plethora of ads urging you to cash in on your structured settlement payments to buy big ticket items, pay down bills or even start your own business, the long-term benefits of receiving reliable structured settlement payments typically outweighs these very short-term debatable fixes. However, if you do decide that cashing in on some of your payments may be required to negotiate better credit terms, be sure to select a reputable structured settlement company that’s upfront about the pros and cons.

Author info: Strategic Capital aims at quick and efficient customer service in the secondary structured settlement market. Our experienced and knowledgeable experts understand the value of structured settlement payment arrangements and we always perform in the best interests of our clients.

Bob Kraft

I am a Dallas, Texas lawyer who has had the privilege of helping thousands of clients since 1971 in the areas of Personal Injury law and Social Security Disability.

About This Blog

The title of this blog reflects my attitude toward those government agencies and insurance companies that routinely mistreat injured or disabled people. As a Dallas, Texas lawyer, I've spent more than 45 years trying to help those poor folk, and I have been frustrated daily by the actions of the people on the other side of their claims. (Sorry if I offended you...)

If you find this type of information interesting or helpful, please visit my law firm's main website at You will find many more articles and links. Thank you for your time.

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