By James Farias
Founder & CEO, Relief Strategies, LLC
For many people, the biggest hesitation around debt settlement isn’t the program itself. It’s the credit impact. And that’s fair. Credit scores affect everything from car loans to apartments, and even job opportunities in some industries.
But while it’s true that debt settlement can hurt your score temporarily, that doesn’t mean you’re stuck with bad credit forever. Or even for long. With the right steps, it’s possible to protect your credit profile during the process and rebuild stronger after.
Let’s break it down.
💥 During Debt Settlement: What You Can Do to Protect Your Credit
Once you enroll in a debt settlement program, your creditors will stop getting paid directly. That’s part of how the process works. Accounts must go delinquent before settlements can begin. So yes, you’ll see a dip in your credit score.
But that doesn’t mean you’re powerless. Here are three ways to stay in control:
1. Make Your Program Deposits On Time
Once you’re enrolled, your monthly program deposits are the fuel that powers your settlements. Late or missed deposits can delay your progress and potentially cause your settlement timeline to stall.
Why it helps: Staying on schedule builds trust with your provider, keeps your settlements moving, and reduces how long negative accounts remain unresolved on your report.
2. Accept Reasonable Settlement Offers Quickly
Your negotiators will work hard to secure deals, but they can’t move forward without your approval. When reasonable offers come in, giving the green light promptly can speed up resolution.
Why it helps: The faster debts are settled, the faster they show as closed on your credit reports—and the sooner you can begin rebuilding.
3. Preserve Open, Positive Accounts
Not all credit accounts have to be included in your settlement program. If you have a credit card or tradeline with a low balance that you’ve been managing well, and it’s not part of the program, keeping that account open and current can help maintain some positive activity on your credit report.
Why it helps: It softens the blow of negative marks by showing ongoing responsible behavior.
4. Don’t Miss Other Bills
Just because you’re behind on unsecured debts doesn’t mean everything should fall apart. Stay current on any loans or bills that aren’t included in the program. That includes your mortgage, car payment, utilities, and phone bill.
Why it helps: Payment history is the number one factor in your credit score. Keeping other accounts in good standing can preserve stability.
5. Avoid New Hard Inquiries
Now is not the time to apply for more credit, especially high-interest cards or loans. Hard inquiries can further ding your score and won’t provide much value while you’re in a program.
Why it helps: Limiting new credit activity keeps your profile cleaner and protects your long-term recovery path.
🗣️ “Fixing your credit isn’t about chasing a number. It’s about changing your story.”
— Ollie, Chief Optimism Officer
🔧 After Debt Settlement: 5 Steps to Rebuild Your Credit
Once you complete your program and your debts are resolved, the real recovery can begin. Most people can start rebuilding their credit within six to twelve months after finishing their settlement plan.
Here’s what to focus on next:
1. Check and Update Your Credit Reports
Pull your credit reports from all three bureaus—Experian, Equifax, and TransUnion—and review them for accuracy. Make sure settled accounts are marked correctly and that no balances remain.
Pro tip: Use AnnualCreditReport.com to access your free reports once a year.
2. Rebuild with a Secured Credit Card
If your credit is too low to qualify for a regular card, a secured credit card can help you reestablish positive payment history. Use it sparingly and pay it in full each month.
Why it helps: New positive activity with low utilization shows lenders you’re regaining control.
3. Consider a Credit-Builder Loan or Savings Program
Some credit unions and fintech platforms offer small loans or savings accounts specifically designed to help you build credit. You make monthly payments, and they report them to the bureaus.
Why it helps: Adds an installment account to your mi; diversity matters..
4. Keep Utilization Low
Credit utilization is the percentage of your available credit that you’re using. Try to keep it below 30 percent—and ideally below 10 percent.
Why it helps: Lower utilization shows lenders you’re not overly reliant on credit, even if your score is still recovering.
5. Stay Patient and Consistent
There’s no magic fix. But there is a path. Most people who complete a settlement program and follow these rebuilding steps begin to see credit score improvement within the first year. Some even qualify for mortgages again within two to three years.
Why it works: The credit system rewards consistency. Time and good habits matter.
Final Thoughts
Yes, debt settlement can hurt your credit. But the bigger story is what happens after.
Done right, this process doesn’t just reduce your debt. It gives you space to rebuild. And rebuilding is possible, even if you’re starting from a tough place.
Your credit score is a snapshot… It’s not a sentence.
We’ve seen people go from declined credit cards to approved mortgages. From maxed-out balances to financial breathing room. And it all started with a plan.
Need help deciding if settlement is the right step for you—or what to do next?
Relief Strategies can walk you through your options and help you protect your future while addressing the stress today.
👉 Visit ReliefStrategies.com or contact us at (888) 870-7922 for a free consultation.
About the Author
James Farias is the CEO of Relief Strategies, LLC, a leading firm dedicated to helping individuals achieve financial freedom through effective debt relief solutions. With over 30 years of business leadership experience and a deep passion for empowering others, James has guided countless clients through the process of reducing debt and regaining control of their finances.
Recognizing how quickly debt can overwhelm even the most disciplined individuals, James focuses on strategies that lower monthly payments, relieve financial stress, and unlock new opportunities. His mission is to help people move beyond financial hardship and build a more secure future.
Connect with James on LinkedIn or visit Relief Strategies to learn more about how he and his team can assist you on your journey to financial wellness.
