The Truth About How Debt Settlement Programs Impact Your Credit Score

Maintaining a good credit score is crucial when it comes to managing your finances. Your creditworthiness is reflected in your credit score, and can affect your ability to obtain loans, credit cards, and even housing. Unfortunately at times, unexpected financial issues may arise, making it challenging to repay outstanding debts or forcing you to take on more debt.

If you’re in debt, the last thing you want is to add to that burden by paying high interest on your credit card bills. Debt relief programs such as ACCS can help you pay off your debts faster and more easily. These programs negotiate with your creditors to settle your debts for less than what you owe. This allows you to get out of debt at a lower cost and at a significantly faster speed. While this may all sound great, you may have also heard that settling your debts through debt settlement can have a negative impact on your credit score.

Once you start a debt settlement program, you’ll stop making payments to your creditors, which can negatively affect your credit score. It’s important to note that if you settle your debts, this information will be recorded on your credit report and may stay there for as long as seven years.* Opting to settle an account, though it may not be ideal when it comes to credit score in the short run, is still a much better alternative to completely skipping payments or choosing bankruptcy.*

For most people who choose to enroll in a debt relief program, the benefit and assurance of getting rid of debt once and for all at a lower cost can greatly outweigh the temporary drop in credit score. Once enrolled in a debt settlement program, there are other measures you can take to improve your credit score going forward. These include making all your bill payments on time, sticking to a realistic budget, and maintaining a low credit utilization. When possible, try to pay down existing debt before taking on more financial obligations. 

Bear in mind that your credit score reflects your financial responsibility. Paying off your debts in a debt relief program is a positive step and will give you the opportunity to start off with a clean slate, even if your credit score takes an initial hit. By proactively enhancing your credit score and managing your debt, you’re creating a solid foundation for long-term financial success. 

If you want to learn more about what to expect when enrolling in the ACCS program, request a custom debt relief plan. Our IAPDA-certified debt specialists can help you determine if debt settlement is right for you.


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