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The Credit RecordAn independent record of credit repair and debt settlement companies

Last reviewed: 13 September 2026

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Credit repair vs. debt settlement vs. debt consolidation

These get marketed almost interchangeably, especially in ads. They solve three genuinely different problems.

Credit repair

Disputes items on your credit report — it doesn't change how much you owe. See what credit repair actually is for the full mechanism. Governed primarily by CROA.

Debt settlement

Negotiates with your creditors to accept less than the full amount you owe, usually after you stop making payments and instead pay into a dedicated savings account the settlement company draws from. This can genuinely reduce what you owe, but it typically tanks your credit score further in the short term (since it requires missed payments to work), can trigger a tax bill on the forgiven debt, and carries real risk of being sued by a creditor before a settlement is reached. Governed primarily by the FTC's Telemarketing Sales Rule Advance Fee Rule when sold by phone.

Debt consolidation

Combines multiple debts into a single new loan or balance-transfer product, ideally at a lower interest rate — it doesn't reduce what you owe, and it doesn't touch your credit report's existing history. This is a lending product, not a repair or negotiation service, and it's the one of the three we don't currently vet company-by-company on this site — see the Register for why.

A nonprofit alternative worth knowing

A debt management plan (DMP) through an NFCC- or FCAA-accredited nonprofit credit counseling agency is a fourth option, distinct from all three above: the agency negotiates lower interest rates (not a reduced balance) with your existing creditors and you repay the full debt over a structured plan, usually 3–5 years. It doesn't damage your credit the way settlement does, and legitimate agencies are funded mainly by creditor contributions rather than large consumer fees.

References

  1. Federal Trade Commission, "Coping with Debt" and "Debt Relief Services & the Telemarketing Sales Rule: A Guide for Business."
  2. National Foundation for Credit Counseling (NFCC) and Financial Counseling Association of America (FCAA), public descriptions of debt management plan structure and funding.

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