Consolidating debt without hurting credit score turn friendship into dating

Yes, even if you’re behind on your payments and maxed out on your credit lines, debt settlement — a method that seeks to get you off the hook for less than you owe — can cause your rating to plummet.Successful debt settlement also includes potential income tax ramifications; the IRS will regard forgiven debt as regular income in the year the settlement, well, settles. So, when you hear others say debt consolidation will “ruin your credit” this is the type of consolidation they are talking about.If you’re considering debt consolidation as a path out of your current budget dilemma, chances are your credit already is bruised.

Credit.com’s experts can help you understand how to get control of your debt — the smart way.

We share strategies for paying down your debt without hurting your credit score, negotiating with lenders, and dealing with debt collectors.

We also highlight your rights as a borrower, explain your bankruptcy options, as well as give you an honest assessment of payday loans.

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And those blemishes stick around just as long as bankruptcy: Seven years.

In fact, having an account marked “settled” is only slightly better than “unpaid.” Any status besides “paid as agreed” or “paid in full” will injure your credit.

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If you hired a debt-settlement company, you’ll also have to fork over a percentage of the total debt when you approve the settlement.

(Pay nothing — zip, zero, squat, diddly — up front.) When the settlement is reported to the Big Three credit-tracking agencies, your rating will sink like the Lusitania, dropping almost as much as if you’d declared bankruptcy.

You’re attempting to wriggle out of what you promised to repay. Debt settlement in a nutshell: You, or someone you hire, attempts to persuade your creditor(s) to accept as payment in full something less than payment in full.