All the advertisements about settling your debt for pennies on the dollar make debt settlement sound like a great solution. But failing to pay what you owe a creditor will take a serious toll on your score. The 680 score would lose 45 to 65 points with this maneuver, while the 780 score would shed 105 to 125 points. Now our scenario assumed that our borrowers would miss one payment before settling the debt with the credit card companies. In reality, that settlement negotiations can drag on much longer, with each missed payment taking another chunk out of your score. settling a debt with a collection agency would hurt less because the final formula is set up to weigh more heavily.

What the original creditor says about you than what a collection agency reports. Then if our borrowers were settling with the collection agency instead, their scores would be lower to begin with. Because they would have collection accounts on their records. Also, you should know that the amount of your debt or your credit or forgive in a debt settlement solution is typically added to your taxable income. So you may not save you may save some money by settling a debt but you'll give some of it back to Uncle Sam and higher tax. Also, please be aware of the felling in old collection will lower your score if it is not done correctly.