In pretty much every conceivable option of debt settlement you are going to experience significantly negative impacts from debt settlement. Of course, even if you are current the debt itself is having a major impact on yourcredit scores. If you are not current, then you are having an even bigger negative impact on your credit. The two most highly weighed factors of your credit score are payment history and debt. It is very rare that a creditor is going to negotiate your balance with you if you are current on your payments; I mean after all why would they? Even if you were fortunate enough to get the creditor to agree to a settlement of your balance without you going delinquent then they could charge off the remaining portion. The more likely scenario if you are looking to settle your debt is you will have to go delinquent on your accounts. Whether you have already gone delinquent on your accounts or become delinquent on your accounts that will have a very severe negative impact on your credit score. On top of that if you are struggling with your debt it is likely that you are maxed out on your credit cards, which is having a very significant impact on you as well. At this point you are going to experience a significant amount of time with bad credit. It of course all comes down to how quickly you can come up with the money to negotiate and how your creditors report it. In most cases it takes a while to negotiate on these accounts so it is likely that the accounts will be charged off and even possibly be sent to collections as well. Once this happens you are likely going to be burdened with bad credit for quite a long time. The accounts are going to stay on your credit report for 7 years from the original date of delinquency. Of course, the longer you get away from that period the less of an impact it will have on your credit scores, but it is definitely going to have a significant negative impact even once the item is paid. Even if you pay a charge off or a collection your credit score will not really improve much, if at all. The way the credit scoring model works as if you allowed it to go into a charge off status or into a collection then that is what is going to impact you. Another important part of all of this to keep in mind is if you enroll all of your positive accounts they will all be closed and if you do not keep any of your positive lines of credit open then it will even have a more significant negative impact on you. If you can get the creditors to agree to remove the account from your credit report once you settle it that would be ideal, however it is unlikely, but if they are willing you always need to make sure you get it in writing before you pay the settlement. Likely, your account will be updated to “settled for less than the full balance”. Keep in mind that credit scores are all based on a risk model and the purpose is so that lenders can determine if the borrower is a good potential risk to lend to. If you are currently in enough financial trouble that you are considering debt settlement then you likely are not a highly qualified borrower at that time. However, that doesn’t mean you can never repair your credit. If you can keep any good open lines of credit open and current that would be ideal so you can keep your positive credit history. As well, the quicker you can get the accounts settled the better, but it may not make a significant difference if they are in a collection or charge off status. It will take time to recover with your credit scores, but if you don’t see a way out of your debt it may be a long time anyway before you have good credit and are in a better financial position. In short, debt settlement will almost definitely have a negative impact on your credit scores.