Credit settlement is a service available to everyone who is not capable of paying his or her debt in full.  Yes, almost anyone can negotiate for a discounted amount on their loans, except of course, for those who are financially fit to settle their accounts.

A credit settlement has both its pros and cons.  Being able to pay a loan at a discounted price is one obvious advantage.  However, a settlement will decrease one’s credit score considerably.

Usually, a credit settlement is offered to those who are delinquent in their payments.  If you want to avail of one before that happens, though, then by all means do it.  Of course, the final decision lies on the hands of your creditors.  You have to convince them that you are not capable of paying the incoming amount due.  Your initiative is key for this negotiation.  Your creditor will base his decision on your financial status.

Apart from the obvious  benefit of paying a smaller amount, a successful credit settlement agreement will definitely take the weight off your shoulders.  You will get to sleep more peacefully at night, as well as avoid lawsuits from your creditors.  It is also beneficial to the creditors to some degree.  With the economic crisis of late, there are thousands of people who have defaulted on their loans leaving creditors with a plethora of lawsuits against their clients with no payments in return.  A creditor will certainly settle for a lesser amount rather than getting nothing at all.

A disadvantage of a credit settlement is that it harms your credit score, as previously stated.  A report that shows that your account has been settled instead of paid will automatically have a negative effect on your credit report.

Why so? Because creditors see someone with a bad credit score as a risky client.  They would prefer a client who can pay over someone who would avail of a discount.  Depending on the amount, discount and payment terms, a credit settlement can stay in your credit report for three to seven years.

You can always make your credit repair process faster with various methods such as paying future loans promptly every time.  Pay beyond the monthly minimum requirement.  Avoid availing of new loans. Having a significant savings amount will also get your credit score up.  Remember that the older your credit settlement, the less its impact on your credit report.