Does Debt Settlement Destroy Your Credit?

People often say they are afraid of using debt settlement because it will ruin their credit.

Is this true?

Yes. And no. It all depends.

First, you have to define “perfect” credit. Most people think of perfect credit as always paying on time. But that’s not always true. It you have lots of debt, and lots of credit cards, and you always pay on time – but you can barely afford to buy groceries (or worse, you pay for groceries with your credit card) – then you don’t really have perfect credit in the first place. You may have a perfect payment history. But having so much debt you can barely buy a candy bar also lowers your credit score, leaving you with less than perfect credit.

Second, if you truly have perfect credit, then why are you even considering debt settlement? While you can “force” debt settlement if you are overwhelmed with debt, and stop paying to get the creditors to bargain with you, not all debt settlement companies will help you unless you are already behind on your payments. If you’re trying to force the need for debt settlement, then you will hurt your credit score.

Third, you need to weigh the benefits of keeping your “perfect“ vs. the benefits of getting out of debt. And saving money on interest. And keeping your debt from growing bigger. For many people, getting out of debt should be the first goal. After all, what good is having “perfect” credit if you can’t use it? Isn’t that what credit is for in the first place, to borrow money? Simply having good credit is worthless if you’re neck-deep in debt!

Struggling With Credit Card Debt? Get a FREE debt consultation from CuraDebt, a top-rated debt relief company: Find out how much you can save. Get help finding the best solution for you. No obligation & 100% confidential.

Fourth, realize that the compounding effect of credit card debt can keep you in debt for MANY years. But credit repair can be fixed. It’s not easy, but it can be done.

So, will debt settlement destroy your credit? Yes, it can lower your credit score. But “destroy” your credit? If you’ve got too much debt, chances are your credit score is not as good as you think it is, anyway. So destroy may be too strong of a word.

On the other hand, if you’re losing sleep over debt, then it can also destroy your debt as well – and for most people struggling with too much debt, this can actually be more important!

If you’re thinking about using debt settlement, make sure you seriously compare the benefits of getting out of debt with the benefits of keeping your “perfect” credit.