Question: Will Debt Negotiation Affect My Credit?

"I have been looking at some debt negotiation services and have been considering signing up for a service, but most don't seem to offer much information on their sites about whether or not it will hurt my credit report. Will debt negotiation affect my credit?"

Yes. Debt negotiation will have some negative effect on your credit score, at least temporarily. In the process of negotiating your debts, your creditor(s) will be asked to settle what's owed for less than the full amount. This may ultimately close the debt, which will be reflected on your credit report - however the fact that it was settled for less will also be noted.

While that sounds terribly negative, most people who are considering debt negotiation are already experiencing real financial difficulties, in which case each late or delinquent payment has it's own consequences to their credit report. So while there will be some effect, it's usually better than the alternative if you're having a hard time keeping up with the bills already.

Many companies offering debt negotiation services will also offer follow-up credit repair services to help build your credit back up after their initial negotiation services are completed. While the entire process make take a few years, that's a reasonable amount of time for most to get back on track assuming they were having difficulties in the first place.

Debt consolidation is different from negotiation - and has no direct impact on your credit report. For that reason it's a preferred alternative when possible, though often more difficult for people to get, especially if they don't have security to offer.