Debt Relief Effects on Credit Score

Debt reduction is also known as debt negotiation or debt settlement. It is one of several debt relief options available to consumers who find themselves drowning in unsecured debt, such as credit card debt, medical debt, deficiency balance, payday loan, or other consumer debt. All debt resolution options — whether it be bankruptcy, credit card counseling, or debt settlement — have pros and cons. Like other debt relief options, debt settlement / negotiation has positive and negative aspects you need to understand.

Debt Settlement and Credit Score

Instead of making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your balances. These programs usually take two to three years to complete, which is typically the fastest option for a consumer to reach debt freedom.

Debt settlement programs reduce the consumer's credit score during the duration of program and for a year or two after completion. The score reduction is not permanent, and credit scores are known to self-repair when the accounts are resolved. Because credit score calculations are based primarily on an consumer's recent credit history, as the accounts are settled and age they tend to have less of an impact on the overall credit score.

Typically, the fact that a consumer is working with a debt settlement company does not appear on a consumer's credit report. As a result, the report will appear as if the individual settled the debt with the creditors directly, as opposed to filing bankruptcy or using a credit counseling program to eliminate the debt. Visit What You Need to Know about Your Credit Score to learn more.

To get a no-cost, no-obligation quote from a debt settlement company, visit the Bills.com debt relief savings center.

For more information about debt settlement / negotiation and other debt resolution options, see What Are My Debt Consolidation Options?

I hope this information helps you Find. Learn. Save.

Best,

Bill

Bills.com