Debt Settlement and Credit Repair are Not the Same Thing

The consumer is faced with many choices when it comes to getting out of debt: consolidation, credit repair, debt settlement, do-it-yourself, and bankruptcy. Clearly, some of these choices are better than others for your financial future, and it is important to know the differences between the different methods. Services that offer to repair your credit and those that offer to negotiate or settle debt are often lumped together and the terms are used synonymously. They are not, however, the same. What is the difference and which is right for you?

Debt Settlement is a method to reduce your balances in which financial experts negotiate with creditors in order to reduce what you owe overall. For instance, a $10,000 credit card bill may be negotiated down to $5000 or even lower. The goal is to make the amount manageable so you can pay your bills in an ethical manner. You can do this without a professional, but it often helps to have a specialist handle negotiations.

Credit Repair services, on the other hand, offer to “fix” your credit. They do this by examining your credit report line by line to find inaccurate items. If they find one, they report it to the three major credit bureaus in order to have it removed from your report. It can be helpful to have professional help when you spot an inaccuracy or when you are not sure if a balance is valid. However, it should be noted that everything a repair service does for you can be done by yourself. You are entitled to one free credit report from each of the three major credit bureaus each year and can dispute inaccuracies yourself.

There is also the potential that you will fall prey to unscrupulous repair companies. While there are reputable companies that offer useful service, there are also those that would “fix” your credit using unethical or even illegal methods. If you do need to dispute an inaccurate credit report item and would like help, make sure you know how to avoid the scam repair services.

Typically, you can identify these scams by their wording and claims. For instance, a reputable company might tell you that they can dispute inaccurate, out-of-date, or out-of-compliance items. They may also offer financial counseling so you can keep your credit report clean. A scam may say something like, “We will eliminate your bad credit! 100% guaranteed!” or “Remove bankruptcies, liens, loans, and judgment from your report!” Some even tell you that you can “Create a new credit identity – legally.”

Be assured that all of these claims are false. No one can remove bankruptcies, judgments, liens, or loans from your credit report – unless they are inaccurate. If you owe the money, the black mark on your credit report is not going anywhere until it is settled. And you can certainly not create a credit identity legally. In fact, that is fraud.

The ultimate goal of both debt settlement and repair is to help you achieve a better credit score. Repair services do this by cleaning your report of old or inaccurate entries. Settlement does it by attacking the problem directly. This way, your accounts read “Paid in Full,” instead of delinquent. The right one depends on your needs. If you are struggling under loads of credit card and other unsecured debt, debt reduction may be the best way out for you.

Learn about debt settlement, debt consolidation, debt relief, and more at Impact Debt Settlement.