Being a debt analyst I get asked very often from clients how debt settlement effects their credit scores. The answer depends on your particular situation.

Take someone who has $30,000 in credit card debt and is still current with their monthly minimums. During the beginning of the settlement process the credit score will go down. Because in order to obtain a settlement the account must be in default, which will leave derogatory remarks for being late. But once the debt has been settled and shows that you no longer have outstanding balances your score will being to rebound. The reason being that 30% of your FICO score is comprised of your debt to credit limit ratio, once the debt is gone this percentage of your score will go up.

As for the negative remarks from falling behind in the beginning these are disputable. Most reputable credit repair agencies should be able to remove most if not all of these remarks. Besides even without credit repair after about two years those negative remarks diminish in value. The reason for this is that 35% of your credit score is your payment history. However your credit score is only based on the last two years of your credit history. So your credit score is really only a snapshot in time and is pretty much constantly changing.

There is no permanent damage done to the credit report from going through debt settlement, it is not made a public record like bankruptcy.

Now for someone who has the same amount of debt as above but is already fallen behind, then debt settlement will only improve the score. The damage was already done to the credit report in the first place, so once the settlements have been reached the score will only go up.

Most people who are struggling with the idea of joining debt settlement programs are still weighing out all options, usually between settlement, credit counseling, or bankruptcy. While they all have their respective pros and cons debt settlement will save the most money and time, other than bankruptcy

Tags: debt negotiation, debt settlement services, consumer credit counseling, credit repair, debt negotiation services