Does It Affect Your Credit Report if You Settle on a Credit Card Account?

"Your most powerful wealth-building tool is your income," says financial guru Dave Ramsey. When attempting to solve your financial problems, consider the effects of solutions such as debt settlement on your credit report.

Credit Reports

A credit report tracks open credit accounts, including loans, mortgages and credit cards, and open billing accounts, such as hospital or utility bills, that have gone to collections--the division of a company specializing in collecting money on unpaid accounts.

Debt Settlement

Debt settlement can only occur if you're delinquent, or behind, in your payments. Creditors won't settle accounts in "good standing," where you're paying the minimum balance on time.

Credit Scores

Equifax, one of the national credit reporting bureaus, says delinquent accounts negatively affect your credit report. Settling the debt ends the downward trend and may raise your credit score a few points, but only time can completely heal your credit report.

Time Frame

Don't allow an account to go delinquent if you can make the payments. Companies remain open to settling debt at 40 to 50 cents on the dollar for accounts six to 12 months delinquent. The longer it stays delinquent, the more likely the company will settle for less.

Debt Relief Companies

Companies offering to settle your debt don't do anything you couldn't do yourself. Although some legitimate companies exist, others waste your time and money. The U.S. Government Accountability Office suggests consumers get settlement agreements in writing before sending any money.