Elizabeth Potter,Robert Galinsky, Dawn Wise, Craig Cooke

The thought of debt consolidation at times can be intimidating especially when you are neck deep in debts. However, with the right financial management advice and help, you effectively are able to alleviate debts like credit card debts with either debt consolidation or debt settlement. Now the question is how do debt consolidation and debt settlement affect your credit score? 

How Does Debt Settlement Affect Your Credit Score?

When you choose debt settlement for repaying your creditors, this means you have agreed to pay less than the balance you owe; however, opting for debt settlement adversely affects your credit score. In fact, experts say that debt settlement affects the credit score of a person very much like bankruptcy. They suggest that when you choose debt settlement, you should always check the debt settlement ratings of the company before you choose the experts there to manage your condition.

How Does Debt Consolidation Affect Your Credit Score?

When you consolidate your loans under debt consolidation, you are able to reduce the monthly payments that you make to the creditor for the elimination of the debt. However, note that when you choose debt consolidation for repayment of your debts, you will experience a dip in the credit score. Like debt settlement, you should also take the advice and counsel of skilled financial experts to help you understand the consolidation loan and whether it is a feasible option for you.

When it comes to choosing debt settlement or debt consolidation for repayment of pending loans, debt management, and relief experts suggest you should weigh the pros and cons of both before you finally come to a decision.