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Home / Blog article: When a debt is settled (the settlement amount paid in full), will it hurt my credit decisions in the future by having debts that were settled rather than paid in full?

When a debt is settled (the settlement amount paid in full), will it hurt my credit decisions in the future by having debts that were settled rather than paid in full?

Hello, thanks for the question. The downside to debt settlement is that it does hurt your credit score because you will likely need time to accumulate enough money to make a reasonable settlement offer. During that time your creditors are not getting paid if you use the services of a debt settlement company. Instead, they will typically set up a trust account for you and you will make a deposit every month. Once those deposits add up, they approach your creditors (with your permission) and try and reach a settlement.

When they negotiate a settlement on your behalf which will be less than you originally owed, your credit will not be marked as paid in full but you will be released from having to pay all of your debt back. So in the end, you save money and get out of debt faster than with a debt management program but settlements hurt your credit.

Thanks again for the question.


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