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Does Debt Relief Hurt Your Credit Score?

Does Debt Relief Hurt Your Credit Score?

by

JG Wentworth

June 30, 2023

9 min

Man and woman looking at credit score report

Being stuck in credit card debt like being stuck in quicksand. All the scratching and clawing you can muster might only be good enough to keep your head above water (or sand) – for now.

If you’re in credit card debt, making minimum monthly payments is only a gateway to more stress as monthly bills reflect your growing interest. Just like being stuck in quicksand, the only surefire way to survive credit card debt is to find the right escape plan.

Ahhh, Debt Relief.

A Debt Relief program (like JG Wentworth’s) can be a fantastic way to jumpstart your financial future. By negotiating with your creditors, experienced Certified Debt Specialists can often settle your debts to significantly lower the amount you owe and create a manageable path to resolving your debt once and for all.*

Simpler, quicker and more effective than making partial monthly payment? Seems like the perfect way to leave your debt in the proverbial dust. However, it’s important to understand the potential ramifications of this Debt Relief method in order to truly decide if it’s the best path for you.

Do You Know the Score?

Ah, the almighty credit score. Crucial when buying a home, a car or other major purchases, a great credit score today could mean a favorable interest rate tomorrow. On the other hand, a low credit score could mean higher rates on future loans or credit cards, or even being denied the opportunity to purchase or apply for those things altogether.

There’s way too much that goes into the calculation of a credit score to go into here, but just know that it is a very high-level reflection of your overall financial health. The higher your score, the safer a risk and more desirable a borrower or customer you are deemed to be.

If you are mired in longstanding credit card debt, there’s no way around the fact that entering a Debt Relief Program puts a spotlight on your financial challenges.  In fact, many candidates for this solution experience lowered credit scores prior to Debt Relief because their accounts are already past due. Either way, those who choose this route can expect a noticeable drop – often over 100 points – that can affect your score for up to seven years.

There’s a Bright Side

Are we suggesting that you avoid Debt Relief Programs entirely? Of course not!  Even after assessing other options like loan consolidation or bankruptcy, lots of customers determine that Debt Relief is still the best solution for them. Here’s why:

A Fresh Start:  Most people fighting uphill against debt aren’t in need of a quick overnight fix. While Debt Relief can speed up your path to resolving your credit card balances (especially if you aren’t making any progress due to growing interest balances), what many customers actually need is a more stable path to a positive financial future.  A Debt Relief program can pave a path for you to pay off your balances once and for all while steadily showing good financial habits that can eventually bring your credit score back to its former glory.

Score – What is it Good For?: Planning your financial future is a great way to assess how important your credit score will be for you in the next few years. If you have no plans to buy real estate or make any other big moves that might be affected by a temporarily-lowered credit score, than you may not need to worry about this speed bump – especially if you are prepared to make all of the recommended moves you’ll need to help raise it again.

Stress Relief: If you explore all of the options available to help resolve your debt and find that Debt Relief is still the most efficient and impactful way to go, then it’s also might be your clearest path to eliminating the stress that comes with opening those bills and revisiting your lingering balances every month.  Getting rid of that mental monkey on your back may very well be a benefit that outweighs any potential credit score challenges you’d encounter.

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Make The Best Choice to Change Your Life

For over three decades, JG Wentworth has helped customers address their financial challenges and pursue their goals. We offer more programs and solutions than ever before, and it’s important to us that you explore all potential options and choose the path that will work best for you.

If you are struggling with credit card debt, we’re happy to help discuss all of the different paths you can take towards the fresh start you’re looking for. Give us a call at 888-570-5240 and we’ll chat about your situation and help determine whether our Debt Relief Program (or any of our other solutions) is the right choice for you!

The information on this blog is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.

Sources Cited

Egan, J. and Strom, M. Debt Settlement: How It Works and Is It Worth The Risks? Forbes.com. Retrieved from https://www.forbes.com/advisor/debt-relief/debt-settlement-how-it-works-and-risks/

Twin, A. How Will Debt Settlement Affect My Credit Score? Investopedia.com.

Retrieved from https://www.investopedia.com/ask/answers/110614/how-will-debt-settlement-affect-my-credit-score.asp

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*Clients who are able to stay with the program and get all their debt settled realize approximate savings of 51% before our 25% program fee.

JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.

Debt solutions program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt solutions services in their state. JGW is licensed/registered to provide debt solutions services in states where licensing/registration is required. Debt solutions program results will vary by individual situation. As such, debt solutions services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt solutions services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment. JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy. Client Grievance Procedure: If you are unable to resolve an issue with your Debt Specialist or Client Services Representative, please request to speak with a manager. If you cannot reach a resolution with a manager, please escalate communication via email at [email protected] or direct mail to the business address listed on our contact page.