Will Debt Settlement Affect My Credit Score As Bad As Bankruptcy Would?

Posted on July 3, 2009
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There are a number of concerns an individual will have when it comes to dealing with debt. In addition to dealing with open debt accounts, concerns will revolve around the many ways to close out these accounts. The two most common ways a person will seek to deal with debts that have spiraled out of control are bankruptcy and debt settlement. In the past, the main option people would explore would be filing for personal bankruptcy.

Today, however, the options for exploring settlement offers are varied and available. Nonetheless, many will have serious concerns as to whether or not a settlement plan will damage a credit rating as bad as bankruptcy. This is a valid concern that deserves a closer inspection.

The short answer to this question is a resounding no. Settlement proceedings are far less involved than bankruptcy and the impact it will have on your credit will be significantly less. This is not only because bankruptcy lasts on a credit rating for a decade while debt settlement only lasts 7 years. It is because settlement offers can be targeted towards specific debts.

For example, let's say you owed a great deal of money on three credit cards. One card is maxed out with a $3,000 balance. You can offer this care a settlement offer of $1500 and if it is accepted, your credit rating will reflect as such. This is understandable since you did not pay the full balance you owed. However, the other three credit cards would not be affected by the debt settlement offer.

With bankruptcy, ALL of your debts and assets will come into play. This comprehensive approach will be duly noted on your credit rating and the impact will be severe. Additionally, there is no way to fix the impact of bankruptcy on a credit rating. Settlement marks on a credit rating can often be repaired in a number of ways when your finances improve.

By the way, by researching and comparing the best debt settlement services in the market, you will be able to determine the one that meet your specific financial situation. Nonetheless, it is advisable going with a trusted and reputable debt counselor before making any decision, this way you will save time through specialized advise coming from a seasoned debt advisor and money by getting better results in a shorter span of time.

Hector Milla runs the Best Debt Settlement Service website – where you can see his best rated debt settlement service recommendation.

Visit for further information and read our full review of the best debt settlement company, plus articles and video training about how to get the most of your debt settlement process.

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