Settling your debt isn’t always a good idea, but like it or not, it’s an option that exists within the lending industry. In general, settling a debt will lower your score, but that’s not always the case—particularly if the debt in question is already late.


A couple of years ago, a friend of mine settled his debt and recently told me he was surprised to find that his score never dropped. I was confused, too, because I’ve read that debt settlement looks really, really bad on a credit report. Upon further research, it seems that if your debt is already delinquent, a debt settlement won’t make your score much worse. Here’s how credit expert Todd Ossenfort puts it:

When you settle a debt for less than is owed, your credit history will take a severe beating. If you are already more than 90 days late in making payments on your credit cards — which I hope you’re not — then going the debt settlement route will probably not cause your credit score to get much worse.


It’s still not a decision to be made lightly, but when you’re considering debt settlement, it’s worth pointing out since most people considering it are probably late on that debt to begin with. For more detail, head to the full post at CreditCards.com.

How debt settlement works, how it affects credit scores | CreditCards.com