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I have great credit but am feeling very overwhelmed by all of my monthly payments to my creditors. I am considering debt settlement but am scared to ruin my credit. On average how much will my credit score be affected?

Thanks for the question. Debt settlement is best viewed as a bankruptcy alternative. If your payments are big but manageable and not growing (you are paying more than the minimums and not adding more debt), then you might want to look into a reputable debt management program. However, if your debt is still rising and growing faster than you can keep up with despite sensible spending, you may need to consider debt settlement despite its adverse credit score affects.

No question, your credit score will suffer badly under debt settlement but it is the only way for people to possibly become debt free within a few years without bankruptcy. It’s really a decision you need to make:

1. How far are you behind?
2. Are you falling farther behind despite cutting back spending?
3. Do you see any way your income can catch up to help you out in the near term?
4. Do you have another option (home equity, low rate loans, etc)?

Your credit score under debt settlement will be damaged during and after the process for several years however you can build it back up with a disciplined plan once you exit debt settlement.

Two more things to think about:

1. Your credit score will also be negatively affected if you start falling behind and do nothing
2. To avoid that, debt management can consolidate your bills and help make the payments more manageable with less credit damage (although the program will take 2 to 4 times as long as debt settlement) – that’s the tradeoff.

I hope this helps.