Using a debt settlement service will affect your credit rating.
When enrolling in this type of service the company receives payments from the consumer and applies them to creditors.
They handle all of the headache of contacting credit companies and dealing with collections for the consumer.
This is a big relief to most consumers who have found themselves in more debt than they can afford to pay off on a timely basis each month.
Eventually all the payments are made to the creditors and the consumer can begin rebuilding their credit and their financial stability.
There is a period in the beginning when payments have to be in arrears before the debt payment process can begin.
The time period required for overdue balances to place accounts into collections varies among debt service companies.
It is a requirement of creditors before the debt settling process starts.
Unfortunately, these missing payments are reported to the credit bureau during this short period and will affect the credit rating in a negative way.
The time period for late payments listed on credit reports is usually seven years.
However, if there is no recourse and the consumer is already receiving debt collection calls, this is irrelevant.
The negative information on the credit record may cause additional problems with securing more credit or receiving a loan.
Yet in most cases the account is already in negative status because the consumer has already amassed debt that cannot be repaid under the present creditor arrangements.
Once the debt settling service begins making payments, the negative reporting going forward will stop.
The important thing to remember is to begin rebuilding your credit as soon as possible by making on time payments for small credit accounts.
In this way the credit rating can be rebuilt in under a year in most cases.
Your debt service company will update the late payments that have been reported to the credit bureaus to 'Charged Off Settlement' once payments have been completed.