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A Word of Caution About Debt Settlement Companies

You’ve probably seen the ads promising that your debts can be settled for less than half of what you owe – and it won’t hurt your credit score. But dealing with debt settlement companies can be a high-risk move that can definitely hurt your credit score.

Debt Settlement at a Glance

Simply put, debt settlement is when the debtor and creditor agree on a lower amount of what is owed. Most of the debt that qualifies for debt settlement is unsecured debt such as credit cards.

Things to be Wary of With Debt Settlement

While the debt settlement companies will assure you that they’ll negotiate with your creditors to slash the amount you owe, you should remember that:

  • They typically charge very high fees
  • They often encourage you to stop paying credit card bills, which will lead to more late fees and other charges and increased collection efforts against you
  • Unless most or all of your debts are settled, the penalties and fees that will have since piled up will negate virtually any savings the company achieved for you

Debt Settlement Can Indeed Hurt Your Credit Score

While most debt settlement companies will try to assure you that your credit score will not be affected, the opposite is true. In fact, debt settlement can ding your credit score just as badly as a bankruptcy would. In fact, Liz Weston, author of the Your Credit Score, said, “If you can erase your debts in a Chapter 7 bankruptcy, that’s a much better option than trying to negotiate settlements.”

How to Select a Debt Settlement Company

If you’re still considering debt settlement, try to avoid doing business with a company that:

  • Promotes a “new government program” that’s just been enacted to help people bail out from credit card debt
  • Charges fees before your debts are settled
  • Encourages you to stop communicating with creditors
  • Offers guarantees that it can eliminate your debt

Looking for the Best Way to Get Rid of Crippling Debt? Call The Oswalt Law Group

One last word about debt settlement companies: tread lightly if you really are considering them. There are better and much more effective ways to discharge your debt. Call The Oswalt Law Group for a free consultation. Our number is 602-225-2222.

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