How does a debt management, settlement, or consolidation affect my credit?

Last Updated: Jun 11, 2013 04:23AM UTC

Any debt relief programs that involve settling your debts for less than what you owe may hurt your credit score. Accounts can appear as "settled" on your credit report, which is negative and can bring down your score.

If working with an agency to settle debts, it's still possible that some creditors could sell your debt to collectors, which will often result in a collections account showing up on your credit report.

A debt management plan that's agreed to by creditors may be the least harmful to your credit. Creditors may waive fees and lower interest rates as well as allow your account to stay current as long as you stick to an agreed-to plan and payment schedule. Since debt management usually involves paying back the entire balance owed, you may avoid accounts marked as "settled" or "collections" on your credit report.

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