Debt Settlement Affect My Credit Score, is it true?

It seems as though individuals and families seeking some form of debt relief are seeing a significant amount of information regarding credit card debt settlement. Obviously, this form of debt relief (like all others) has some critics, which leads to at least a little skepticism amongst consumers who might be considering debt settlement.

One of the most common questions that are asked of debt settlement is whether or not it will have a negative impact on your credit score. The answer is yes, no and maybe. You see, each person's situation is different, so depending on your own personal financial status, credit card debt settlement may have a negative impact on your credit score.

If your bills are always paid on time each month, and your credit score is relatively high, I can say with a great deal of confidence that your credit score will be compromised by the time your accounts are settled. Most people who are paying their bills on time, but are seeking debt relief, do so because they tend to find themselves borrowing from one creditor to pay another in an effort to keep their finances afloat each month. Unfortunately, by doing this you're really not keeping your finances afloat; rather, you're getting yourself deeper in debt. Your credit score might appear to be okay, but overall your finances are lacking the type of stability that is needed to truly stay afloat. In situations like these, people notice that their credit score may fall below 700, sometimes dipping to as low as 500 during the delinquency period that is required to negotiate with creditors. After all of your accounts are settled, and reflecting zero balances, however, you'll see your credit score increase and reach a level which is considered to be high enough for credit approval on an auto loan or home mortgage within 9-12 months.

Those individuals whose accounts are already delinquent will likely not see their credit score negatively impacted due to debt settlement. Rather, those who fall into this category will find that their credit scores will increase significantly after all of their accounts are settled and reflecting zero balances. Let's face it - delinquency is what really impacts a credit score, so by remedying this delinquency, whether through full payoffs or reduced debt settlement payoffs, your credit score has nowhere to go but up.

In summary, depending on your personal financial situation, your credit score may be negatively affected by debt settlement, or this process can have a positive affect. Again, this all depends on your own financial situation. Debt settlement has helped many individuals, families and small businesses to avoid bankruptcy and/or years of paying high interest to various creditors.