If your financial difficulties force you into debt relief, you should expect to see an adverse impact on your credit rating.
Although this is obviously off-putting, it may still be a good idea to try debt relief if you are in serious trouble.
It can help you to get out of debt and your credit score will recover if you are responsible with your future finances.
Your credit score is likely to be low if you are considering debt relief, since you will be holding large amounts of debt already.
The credit score will also be more seriously affected if, rather than using debt relief, you end up becoming bankrupt.
You should ensure that you clearly understand what will happen to your credit rating when you are trying to decide whether debt relief is right for you.
You should also make sure that you understand exactly how it will work and that you also investigate your other options thoroughly.
The way in which debt relief works will depend on the particular circumstances of the borrower who is going through it.
If you discuss your situation with a representative from a relief company, they will be able to give you a clearer idea of what they can do for you.
What happens to your credit rating will depend on what your score is at the time when you enter the debt relief program.
Any form of assistance that you take to help you with your debts will likely have some affect on your credit rating.
Some of these options include debt consolidation, credit counseling, and declaring yourself bankrupt.
Each will have its own particular effect.
Debt relief will have a fairly substantial effect on your credit rating but this should be weighed against the benefits that it provides, for example helping you to clear your current debts.
If you are particularly concerned about your credit score, you should discuss this when you consult with a debt relief company.
They can tell you what to expect.
Debt relief can reduce the size of debts, lower interest rates, or arrange for a longer repayment period so that the monthly repayments are smaller.
This can make debts easier and quicker to pay off.
You will be advised on how you can keep up with your new repayment plan and, as long as you do so, you will be able to get rid of your debts fairly quickly.
The program will make your repayments more manageable so you are less likely to fall into arrears.
Missed payments have a massive influence on credit ratings, so reducing the chances of your missing any will be good for your credit history.
Your credit score will drop when you enter into this program but as long as you stick to the new repayment plan, you will see it rise again.
If you manage to pay off all of your debts without taking out any new ones, your credit score will probably look much better than it did before you began.
The main point is to help you out of a bad situation by negotiating a new agreement with your creditors that ultimately make your repayment more affordable.
This should be your main priority.
Your credit rating will look much worse if you do nothing and end up unable to meet your required repayments than if you take the proactive approach.