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Debt consolidation and debt settlement are not the same thing. In a debt consolidation, you are given a loan to pay off all your creditors. These programs often involve high interest rates, and in most cases you are still required to pay interest to your creditors. With debt consolidation you will still be years away from becoming debt-free.

In a debt settlement program your money is deposited into a special account each month. The credit management firm that holds this account makes payments to your creditors on your behalf. It has been proven that many of these firms claim to be "non-profit," but in reality they are not. If you choose to use a debt settlement program, make sure to request a full disclosure of the services that the firm offers. Sadly, many have entered into agreements with these firms only to find that the firm’s guarantees are never delivered.

Keep in mind that your credit score is likely to become worse before it ever gets better. If any debt consolidation firm or debt settlement firm tells you that your credit score will improve with either of these services, they are lying to you.

A debt settlement will most likely cause unfavorable remarks on your credit report. These remarks can vary depending on the particular creditor. A few examples of unfavorable remarks include: "paid not as agreed," "paid settled," "settled for less than full amount." Please keep in mind that a debt settlement program is not designed to repair your credit.