If you use a debts settlement service to pay off your unsecured debts your credit score will be affected slightly.
Unlike filling for bankruptcy or not paying at all, which both destroy your credit rating, debt settlement will only decrease your score by a small percentage.
How you make your payments on your credit lines accounts for 1/3 of your credit score.
When you make your payment each month the creditor will mark your account "pays as agreed".
This gives you the highest rating.
When you use a debts settlement company the credit agency will report the account as "paid off" but they will not report it as "paid off as agreed".
This will cause your score to decrease a little but not as much as if you chose not to handle the problem at all.
Filing bankruptcy automatically decreases your credit score by 350 points and remains on your record for a minimum of ten years.
Debt settlement, depending on the amount of accounts, will only decrease your score a few points per account.
This, at worst case scenario, can remain on your account for up to seven years.
During those seven years you will be able to increase the score by continuing good repayment practices and eventually the marks from the settlement will be erased.
The bankruptcy score buster will remain with you the entire length of the ten years.
When you use a debt assistance company the credit agencies, as well as future potential credit granters, will acknowledge the effort you put into paying off your debts instead of liquidating them.
The adverse effects of a debt consolidation are quite minimal to those of failure to pay or filing bankruptcy.
It will be much easier to gain credit in the future with a debt settlement on your record compared to that of bankruptcy.