Credit Score Recovery After Debt Settlement: What the Data Shows
Data from our recently graduated clients shows that score recovery after debt settlement is possible and a natural part of the debt resolution process.
One point of criticism leveled at debt settlement is that it causes your credit score to drop. On the other hand, it’s important to remember that carrying around an unmanageable amount of debt can also wreak havoc on your finances. Without a debt relief strategy like debt settlement, your creditworthiness, financial wellbeing, and overall mental health are all at risk. If you choose to resolve your debt with a settlement company, you should know that the credit score impact is temporary.
We surveyed clients who recently graduated from our debt settlement program and found that scores typically improve as settlements are paid-off. They also increase over time if you practice good habits like paying your bills when they are due, keeping your balances low, and limiting new credit.
Your Credit Score Before Debt Settlement Matters
Although it may seem counterintuitive, the higher your credit score is before you enroll in debt settlement, the farther it will drop during the process. Likewise, people who enroll with lower scores may see less impact and a faster recovery. No matter your score, recovery is highly contingent on practicing good financial habits after you graduate.
Most People Who Enroll in Debt Settlement Have Lower than Average Credit Scores
Our survey found that 67.1% of clients who enroll begin with poor or fair credit scores, which may be symptomatic of their financial difficulties that led to pursuing debt settlement.

Lower Scores May Recover Faster than Higher Scores
For example, in our recent survey, 100% of clients who enrolled with fair scores (580-669) graduated with scores that stayed the same or improved. 88.46% who enrolled with poor scores (300-579) graduated with scores that improved or stayed the same. Clients with higher scores still saw credit score recovery and improvement but at a slower rate.
Credit Score Recovery and Improvement Based on Starting Credit Score*
- 88.46% of clients who enrolled with poor scores (300-579) graduated with scores that stayed the same or improved.
- 100% of clients who enrolled with fairs scores (580 to 669) graduated with scores that stayed the same or improved.
- 42.85% of clients who enrolled with good scores (670 to 739) graduated with scores that stayed the same or improved.
- 55.55% of clients who started with very good scores (740 to 799) graduated with scores that stayed the same or improved.
*In October 2020, Accredited Debt Relief surveyed clients who had recently graduated from our debt settlement program in the past three months.
Credit Score Recovery Is Affected by Starting Score and Financial Habits After Graduating
By comparing data from two clients who completed our survey, we can see how their credit scores and financial habits change before, during and after the program. We can see if they took on new debt after graduating and how confident they are managing it.
Enrolling With A Poor Credit Score
Client 1 started with a poor credit score which dropped slightly during the program but improved after they paid off their enrolled debt.
After debt settlement, Client 1 indicated that they followed a budget, kept their debt-to-income ratio under 30% and took on new debt in the form of a credit card.
This was a big change for Client 1, who rated their financial habits 3/10 before enrolling in debt settlement. After they graduated, they felt their financial habits had significantly improved and gave themselves a 10/10.
Overall, this client feels very confident in their ability to take on and manage new debt after completing debt settlement.
Enrolling With A Good Credit Score
Client 2 started with a good credit score which dropped more significantly during the program. However, once they paid off their enrolled debt, their score recovered.
After debt settlement, Client 2 indicated that they followed a budget, kept their debt-to-income ratio under 30% and took on new debt in the form of a car loan and a credit card.
Before enrolling in debt settlement, Client 2 rated their financial habits as poor, giving themselves a 2/10. However, after graduating from the program, they had a more favorable view of their habits and gave themselves a 9/10.
Overall, this client feels very confident managing new debt after graduating from their debt settlement program.

Good Financial Habits Can Speed Credit Score Recovery
After your enrolled debts are settled and paid your score may continue to increase if you practice good habits. Paying your bills on time, keeping your balances low, and limiting new credit to essentials like one credit card and a car loan.
Follow these guidelines to build healthy credit:
- Always pay on time
- Keep your debt-to-income ratio under 30%
- Apply for new credit ONLY when you really need it
- Keep your credit portfolio diverse
- Keep old accounts open to increase your average account age (but don’t use them!)
Is Debt Settlement Worth It For People With Good Credit Scores?
Making minimum payments on high-interest debt could cause it to balloon over time. For example, if you had $25,000 debt, making minimum payments would take more than 30 years and cost you 285% more due to accumulated interest. Preserving a good credit score won’t protect you from the long-term cost of faithfully paying on debt that you can’t afford.
You should ask yourself, how will that burden affect your life long term? Carrying around that debt would not only be stressful, but could hinder your efforts to buy a house, save for retirement, and create a financial legacy for your family and more.
When viewed in context it is easier to understand why debt settlement may be worth the temporary impact on your credit score.

Financial Health is About More Than Your Credit Score
A good credit score is a wonderful thing, but it is not the only metric by which to measure your financial fitness. Credit scores improve over time as long as you follow good habits and responsibly manage your debt. For many, debt settlement is a pathway to better debt management that is well worth the temporary impact it has on your credit score.
Debt settlement is often considered by people who have been struggling with debt for some time. Carrying around a large amount of debt often leads to credit score problems before debt settlement is even considered.
Debt Settlement Builds Confidence
Debt settlement programs usually take 12 to 48 months to complete. During that time clients have a lot of practice making regular payments and the opportunity to learn about good financial habits. This financial reset can be a big confidence boost for clients who didn’t believe in their ability to have a good credit score or be “good with money.”
In our survey, 87.7% of clients who graduated debt settlement now say they are very confident in their ability to manage and pay off new debt.
Is Debt Settlement Right for Me?
If you are thinking about debt relief or have considered alternatives like Bankruptcy, the best thing to do is talk to a Certified Debt Specialist. They can help you determine if you are eligible for debt settlement or other options like debt consolidation.
Contact a Certified Debt Specialist to find out if debt relief is right for you.
*In October 2020, Accredited Debt Relief surveyed clients who had recently graduated from our debt settlement program in the past three months. The data pertaining to “recently graduated clients” cited in this blog is taken from this survey.