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Yes, joining the Freedom Debt Relief program can hurt your credit score. The reason is that Freedom Debt Relief negotiates debt when the credit is behind, thus affecting your credit score. We will cover all of that and more in this article. If you are wondering whether Freedom Debt Relief is a scam or whether Freedom Debt Relief lies, I would recommend you reading our articles covering both of those topics.

Many people have started turning to debt settlement when they get fearful they won’t be able to fully pay back their debt without considering the potential consequences the settlement will have. One of the most significant consequences of debt settlement is credit score. Settling your debt can ruin your credit score, dropping it hundreds of points almost instantly. 

This may not sound right. You did all the right things once you realized you couldn’t pay back your debt, right? You hired a reputable company to work on your behalf, you offered a payment, and you followed through with that offer! So why is your credit score still significantly lower? This article will tell you exactly why, and it will also help you find potential alternatives that could help protect your credit score from a sudden fall.

What Is Freedom Debt Relief?

Freedom Debt Relief is one of dozens (if not hundreds) of debt settlement companies around the nation. Freedom Debt Relief claims to be able to help you settle your debt on your behalf. The way this works is relatively straightforward. Freedom Debt Relief tells you to stop making payments into your creditor. Instead, they open an Escrow account that you start making payments into. This is a very important step in the process for two reasons. First, becoming delinquent on your payments is typically the only way that your creditor will even entertain a negotiation. Second, if you have not missed any payments up until this point, this is the first thing that will begin negatively affecting your credit. 

After you have made a decent amount of payments into the Escrow account, and you have missed an adequate amount of payments, Freedom Debt Relief will begin reaching out to your creditor and offering to negotiate. The process is successful when your creditor agrees to a negotiated repayment and the funds from your Escrow account are diverted to both your creditors and to Freedom Debt Relief (for their services). 

Freedom Debt Relief does have decent ratings on Trustpilot, however it appears their Google Review function has been turned off. 

Does Debt Settlement Ruin Your Credit?

Unfortunately, debt settlement does negatively impact your credit score. There is no way to get around it. If you decide to move forward with debt settlement, you are going to have to face the reality that your credit score will in fact be hurt. But what exactly causes a drop in your score? Here are the two biggest factors that impact your score:

Missed Payments

One of the first things you have to do in order to move forward with debt settlement is to stop making payments on your debt. Even without going through with debt settlement, missing debt payments will decrease your credit score. What’s worse is that you can’t just miss one or two payments won’t be enough. You have to miss payments until your account is seriously delinquent which can take, at minimum, 3-4 months of missed payments. So, before you even begin the process of debt settlement, you can have around 4 months of missed payments hurting your credit score. 

Consider where you are at with your current debt. Have you kept up with all payments so far? If this is the case, you may want to try any other form of debt relief before deciding to try and settle your debt. This can protect you from having missed debt payments listed on your credit report. 

Forgiven Debt

Once the debt is settled, the debt will no longer be listed on your credit report as delinquent or unpaid. It will, however, show that part of the debt was forgiven, which also hurts your credit score. 

Again, this is another reason why other forms of debt relief may be better for your situation. If you think you can make some payments, but not the full payment each month, you may want to consider trying to find something that works for both you and the creditor. Adjusting your payment schedule won’t hurt your credit report nearly as much as a debt settlement would. 

Does Freedom Debt Relief Ruin Your Credit Worse Than Other Debt Settlement Companies?

While there are definitely some scathing reviews that you can find on the internet claiming that Freedom Debt Relief is the only reason someone’s credit score was ruined, this doesn’t necessarily ring true. In fact, almost every single debt settlement company you work with will follow a similar pattern and end with a similar result. Unfortunately, the fact of the matter is that debt settlement can ruin your credit — regardless of who you are working with. This means that your score will be similarly affected, despite the company that you work with. 

What Are My Alternative Options?

So, you may be wondering if there is anything else you can do. If debt settlement can ruin your credit score, is there something that won’t? Well, you do have options! While most debt relief processes will impact your credit score in some way, there are options that are minimally damaging. Here are just a few of those options:

Debt Management

Take some time to consider your financial situation. Consider writing out your income, expenses, and other monthly financial information. Do your expenses and debt outweigh your monthly income? If not, you may want to consider finding some help with debt management. Debt management can be as simple or as in depth as you want it to be. You can work with a financial counselor to figure out how to best organize your finances to ensure you are keeping up with your payments. This can help you feel more confident moving forward while paying off your debt. 

Talk to Your Creditor

While you don’t necessarily want to begin talking about settlement, there is a chance that you can talk to your creditor about the possibility of a revised repayment plan. Depending on whether or not the creditor decides to report the conversation or decision, there may be little to no impact on your credit. If you are able to pay part of your debt each month, offer that to your creditor. There is a chance that they will accept this smaller payment and allow you to pay off your debt over a longer period of time. 

Sell What You Owe

If you owe money on a tangible asset or thing, consider selling it! If you can get a decent price, you could potentially repay the loan without any consequence! Repaying the loan would not raise any red flags on your credit report and you would no longer be in danger of missing payments!

Get In Touch

Regardless of what you decide to do, Ascend is here for you! We can talk through your situation with you and help you decide what option might be best. Give us a call at 833-272-3631 if you have any questions about your getting out of debt options.

Post Author: LincolnE

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