The one-line difference
Credit repair asks: is what is being reported about me accurate? Debt settlement asks: can I pay less than I owe?
The first is about the record. The second is about the debt. They are answered by different people, they cost different things, and they have opposite effects on a credit file.
What settlement actually involves
Most settlement programmes work by having you stop paying your creditors and pay into an escrow account instead, while the company waits for the accounts to become delinquent enough that a creditor will accept a discount. That is the mechanism. It is not a detail.
So while the programme runs, your accounts go 30, 60, 90, 120 days late and then to charge-off. Every one of those is reported, and every one stays seven years from its own first delinquency. Collectors call throughout. Some creditors sue rather than settle. And forgiven debt over $600 is generally reportable as income on a 1099-C.
If you genuinely cannot pay what you owe, a settlement may beat the alternative, and so may bankruptcy — which is often cheaper, faster and cleaner than a three-year settlement programme. We are not against it. We are against it being sold to people who did not understand that their credit was going to be destroyed on the way through.
How to tell which one you are being sold
A credit repair organisation may not charge you before the work is done. A settlement company may not charge until it has actually settled a debt. Both of those are federal rules and both are routinely broken by the same firms.
- If they want a monthly fee starting now, walk away, whichever service they claim to be selling.
- If they tell you to stop paying your creditors, that is settlement, whatever the letterhead says.
- If they promise a specific score increase, that is unlawful for a credit repair organisation to say.
- If they will not put the total cost in writing before you sign, there is nothing to discuss.
What we do instead
We do not settle debts, we do not negotiate balances for a percentage, and we take no referral fee from anyone who does. If your situation calls for settlement or for bankruptcy, we will say so and point you at a non-profit credit counselling agency or a bankruptcy attorney — and then you will not be paying us, which is the point.