While debt relief options may prove to get you out of debt, they aren’t always fool proof when it comes to your credit score. In fact, different debt relief options carry various risks for the future of your credit score.
Anytime you are late your debts you can be sure that your credit will be affected. Luckily, this is typically the time when your credit is likely to be damaged the most. In most cases, people see the bulk of credit damage done when they default on payments or carry a delinquent status on their accounts.
Credit negotiations is one way to lower debt payments and get caught up on your account. There is relatively little risk of credit damage when negotiating changes to the terms of your account with a creditor. As long as you are making payments according to your negotiated deal with the creditor, your credit should remain the same and even improve once your debts are resolved.
Debt settlement is another option that people seek when looking to resolve debts. Settling debts should not be your first choice action when attempting to resolve your financial troubles. Anytime a creditor agrees to accept less than is actually owed on the account, your credit will be impacted to an extent. The reason is that your accounts will be marked at “settled” rather than satisfied, implying you did not pay off the full amount of debt owed.