When you feel you are in debt beyond help, what do you do? Where do you go? It would seem that at such a time, all doors are closed and you have only two options: debt relief and/or bankruptcy. Both can have massive impacts on your credit score, but at least this could be a beginning of the long journey back to a debt-free status and a positive credit score. The first option, debt relief, offers a better way out.
How does it work?
You need the assistance of a very reliable and reputable debt relief organization, and you need to enroll in its or other recommended debt management counseling classes. After all, debt relief is the treatment of a "disease," and if the disease is not cured from the roots, any treatment would be useless. The organization would enter negotiations with the lenders on behalf of the debtor and work out either a small per-month installment toward the complete liquidation of the loan or agree to accept one or two large installments as debt settlement.
How does it affect your credit score?
Debt consolidation and debt relief do affect the credit score, but this is in much less a measure than bankruptcy. Bankruptcy can put a black mark on your credit report that will stay there for all to see for 7 to 10 years. During this period you would be seen as a high-risk investment option and therefore would attract very high interest in any approved loans, if any. Debt relief would give the remark as "settled for less than full" or some similar phrase, which initially would not add too much to your score. However, you would be able to put this behind you within 6 to 12 months with the right strategy and very soon could be on your way to building a positive credit score.
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