How does debt settlement impact my credit score?

Debt settlement can have a negative impact on your credit score. When you settle a debt, you are paying less than the full amount owed, which can be seen as a negative factor by creditors and credit bureaus. In addition, settling a debt typically involves falling behind on payments first, which can result in late payment fees and interest charges, further damaging your credit score.

Once a debt has been settled, it may be reported to the credit bureaus as "settled" or "paid settled" rather than "paid in full," which can further impact your credit score. This negative impact can last for several years, as settled debts can stay on your credit report for up to seven years.

However, it's important to note that if you are struggling to make payments on your debts, settling them may be a better option than defaulting or declaring bankruptcy, both of which can have even more severe consequences for your credit score. It's important to weigh the potential impact on your credit score against the benefits of debt settlement and to consider seeking the advice of a financial professional before making a decision.