When dealing with debt, there are different options consumers have available to them in terms of eliminating that debt. When it comes to debt consolidation and bankruptcy, it’s important to understand the differences between these two approaches, as well as the pros and cons of each.
Debt Consolidation
Can Settling a Debt Harm Your Credit?
Escaping debt can be a long, arduous process. Many times, consumers find success in working with the creditor directly on settling the total amount owed, satisfying the debt by paying an amount that is much smaller than what was originally owed. While debt settlement can lift the burden carrying a large amount of debt places on a consumer, it also comes with its negative attributes, as well. In fact, according to new reports, debt settlement can actually end up harming a consumer’s credit score more than it helps.
A debt settlement can lower a person’s credit score by 100 points or more, according to the National Foundation for Credit Counseling. It can take up to seven years to recover from that negative hit.